MANHATTAN - Virgin Media is selling itself too cheaply through an unfair process to Liberty Global, for $47.87 a share or $23.3 billion, shareholders claim in a class action in New York County Supreme Court.
Liberty, owned by Colorado billionaire John Malone, is buying Virgin to take on Rupert Murdoch in Europe's subscription TV market.
Virgin is Great Britain's second-largest pay-TV provider.
Lead plaintiff Jeff Grimsley claims the buyout offer is "an unfair offer and for an unfair price."
The complaint states: "Upon the consummation of the Proposed Transaction, each share of Virgin Media common stock will be converted into the right to receive (i) $17.50 in cash, (ii) 0.2582 Liberty Global Series A shares, and (iii) 0.1928 Liberty Global Series C shares. Based on the price of Liberty Global's shares on February 4, 2013, the day prior to the announcement of the Proposed Transaction, the implied value that Virgin Media shareholders will receive is $47.87 per Virgin Media share. Additionally, Virgin Media shareholders will own approximately 36% of the pro forma shares outstanding of Liberty Global and have approximately 26% of the voting rights. The Proposed Transaction is valued at approximately $23.3 billion. The Board has breached their fiduciary duties by agreeing to the Proposed Transaction for grossly inadequate consideration. As described in more detail below, given Virgin Media's recent strong performance as well as its future growth prospects, the consideration shareholders will receive is inadequate and undervalues the Company.
"Defendants have exacerbated their breaches of fiduciary duty by agreeing to lock up the Proposed Transaction with deal protection devices that preclude other bidders from making a successful competing offer for the Company. Specifically, pursuant to the merger agreement dated February 5, 2013 (the 'Merger Agreement'), defendants agreed to: (i) a strict no-solicitation provision that prevents the Company from soliciting other potential acquirers or even in continuing discussions and negotiations with potential acquirers; (ii) a provision that provides Liberty Global with five (5) business days to match any competing proposal in the event one is made; and (iii) a provision that requires the Company to pay Liberty Global a termination fee of $235 million in order to enter into a transaction with a superior bidder. These provisions substantially and improperly limit the Board's ability to act with respect to investigating and pursuing superior proposals and alternatives, including a sale of all or part of Virgin Media."
Grimsley seeks class certification, an injunction and damages for breach of fiduciary duty and aiding and abetting. He is represented by Shannon Hopkins with Levi & Korsinsky.