Swedish bank Handelsbanken Fonder has filed legal action in the US seeking to block a $13 billion deal that would take Endeavor Group Holdings - the owner of talent agency WME which is currently listed on the New York Stock Exchange - back into private ownership.
The deal, announced earlier this month, is being led by private equity firm Silver Lake Capital, which already has a 71% voting stake in the business. Under the arrangement Silver Lake will acquire the rest of the company's stock at $27.50 per share, although with a few exceptions. Some specific shareholders, including Endeavor co-founder Ari Emanuel, have the option to rollover their equity interests into the new privately owned entity.
It’s that preferential treatment of some shareholders that Handelsbanken Fonder objects to. Dubbing the deal a ‘squeeze out merger’, the bank says that Endeavor Group Holdings is violating an ‘equal treatment provision’ in its own charter, which was agreed by shareholders back in 2021.
“In violation of the equal treatment provision”, says the bank’s lawsuit, “Class A stockholders are being treated differently based on their identity. On one hand, preferred insiders have the ability to roll their equity into the post-squeeze out company. On the other hand, unfairly low consideration of $27.50 per share is being foisted on the company's public Class A stockholders”.
“Simply put”, it goes on, “the squeeze out does not respect the public Class A stockholders’ charter-enshrined right to ‘have the right to receive, or the right to elect to receive, the same form of consideration’ as the consideration received by the preferred, insider Class A stockholders. Moreover, there was no vote or waiver pursuant to this provision permitting the disparate treatment the squeeze out contemplates. Thus, the squeeze out plainly violates the charter”.
Endeavor is yet to respond to the lawsuit.