(CN) - Concert promoter Live Nation orchestrated a phony bidding war in the $135 million sale of 17 theaters, the spurned buyer claims in Los Angeles Superior Court. Key Brand Entertainment claims Live Nation Worldwide and Ambassador Theatre Group violated a bidding rights agreement it secured after buying a string of East Coast theaters from Live Nation for $90 million.
Key Brand bought Live Nation's Broadway East Coast touring network and eight U.S. theaters for $90 million in 2008. As part of the deal, it says Live Nation signed a bidding agreement for the upcoming sale of its theaters in the United Kingdom.
Key Brand says the agreement allowed it to match bids submitted by third parties, if the bids fell within a certain range of Key Brand's offer, and gave Key Brand "the right, and not just the opportunity" to buy the theaters.
Live Nation was allowed to accept a bid from a third party that was 107.5 percent or more than Key Brand's offer. If the third party's bid was within that range, Live Nation was to give Key Brand the chance to match the bid.
After making a string of offers, Key Brand says it submitted a final bid of more than $133.5 million to Goldman Sachs, which was handling the bidding for Live Nation. After the deadline had passed, Key Brand says it found out that only one other "significant" offer had been made - for $131.1 million.
Key Brand claims it should have won the theaters, except for a last-minute bid that violated the agreement. It claims Ambassador Theatre Group offered $143.6 million - barely exceeding 107.5 percent of Key Brand's bid.
Key Brand claims Live Nation told Ambassador how much to bid, to block Key Brand from the sale. It claims Goldman Sachs told Key Brand that it had lost its matching rights because Ambassador's offer was above the matching window and that Live Nation planned to accept Ambassador's offer.
Ten days later, Live Nation instructed Goldman Sachs to offer Key Brand the theaters for $155.7 million, if it agreed to release Live Nation from the bidding agreement and pay a nonrefundable $8 million deposit, according to the complaint.
Key Brand refused.
Live Nation is reportedly closing its deal with Ambassador.
Key Brand wants an order placing the ownership of the theaters in trust and clarifying Key Brand's rights regarding the sale.
Key Brand is represented by Susan Allison and Stanley Gibson with Jeffer Mangels Butler.
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