MANHATTAN (CN) – Shareholders filed a federal class action challenging Time Inc’s proposed $2.8 billion sale to the Koch-backed Meredith Corporation.
Represented by the firm WeissLaw, lead plaintiff Joel Rosenfeld accuses Time’s board and executive of failing to disclose conflicts of interest for Time insiders and its financial adviser Morgan Stanley. Only Time, its top executives and board are named as defendants — not Meredith or Morgan Stanley.
Iowa-based Meredith owns television stations that reach 12 million U.S. households. Its women- and lifestyle-focused magazines and websites include Better Homes & Gardens, Family Circle and Allrecipes. Time has its eponymous magazine, Sports Illustrated, People, Fortune and Entertainment Weekly, boasting monthly engagement of more than 230 million users globally.
When Time announced the merger on Nov. 26, 2017, it touted the $18.50 per-share price as a 46 percent premium over the Nov. 15, 2017, closing price.
But shareholder Rosenfeld says Time insiders will reap a substantial financial windfall under terms of the merger agreement that convert all unvested equity-based awards held by company executives into right-to-receive cash payments.
Richard Battista, the media empire’s CEO, stands to reap $6.2 million in cash payouts, while three other top executives would each garner more $2 million.
If fired after the merger, Battista would walk away with more the $15 million, the complaint alleges.
Golden parachutes would also lead other Time executives to split at least $20 million if they are fired after the acquisition, according to the complaint.
The complaint further accuses Time of failing to disclose the company’s unlevered free-cash flows for 2017 through 2022, and not disclosing the line items utilized to calculate the Time’s unlevered free cash flows, including adjusted operating income before depreciation and amortization, stock-based compensation, taxes, capital expenditures, and changes in net working capital.
Meredith received $650 million in financial backing from Koch Equity Development, the private-equity arm of Koch Industries, the energy conglomerate of the billionaire Koch brothers known for their advocacy for conservative causes.
Meredith has maintained that Koch will not get a board seat or influence editorial operations.
Representatives for Time and Meredith did not respond to request for comment Tuesday.
Rosenfeld seeks class certification, an injunction against the merger, and rescission and damages if it is completed. He is represented by Richard Acocelli at WeissLaw in Manhattan.