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Warner faces second lawsuit from unhappy shareholders

By | Published on Wednesday 25 May 2011

Warner Music Group

The Warner Music Group is facing a second lawsuit regarding the sale of the company to Len Blavatnik’s Access Industries. As previously reported, shortly after the Warner board, whose members control 56% of the music major, announced they were selling the company outright to Blavatnik, one minority shareholder launched legal proceedings through the Deleware court arguing the company’s directors had not secured the best possible deal for stockholders.

The new lawsuit, launched in the New York courts last week, makes pretty much the same claim. They also raise concerns about the sale process and the agreement between the Warner board and Blavatnik, which, they argue, make it very hard – and detrimental to all stockholders – for any other potential bidders to mount a hostile takeover by courting the 44% of shareholders not directly represented on the board. The introduction of a rival hostile bidder would, of course, most likely up the price Blavatnik would have to offer to buy up the Warner shares not controlled in the boardroom.

The new lawsuit also questions recent changes to the rules governing so called ‘restricted stock’ owned by Warner CEO Edgar Bronfman Jr, who is known to have supported the Blavatnik takeover bid, and who will stay in charge of the music firm under its new owners. The lawsuit says the rule changes have dramatically increased the cash payout Bronfman will receive for the restricted stock as part of the Access Industries deal.

Neither Warner not Access Industries have responded to either lawsuit so far.



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