Stockholders v UnitedGlobalCom, Inc.
Stockholders Question Wisdom of Merger
A class action has been filed against UnitedGlobalCom and certain of its officers and directors by stockholders. The action claims that the defendants violated federal securities laws in its handling of the merger with Liberty Media International, Inc. The stockholders seek to recover compensatory damages for the loss of value of their stock.
Among other things, plaintiff's Complaint alleges that the consideration to be paid to Class members in the transaction is unconscionable and unfair and grossly inadequate because the intrinsic value of UnitedGlobal's common stock is materially in excess of the amount offered given the stock's current trading price and the Company's prospects for future growth and earnings. Additionally, the Complaint alleges defendants have breached their duty of loyalty to UnitedGlobal stockholders by using their control of UnitedGlobal to force plaintiff and the Class to exchange their equity interest in UnitedGlobal at an unfair price, and deprive UnitedGlobal's public shareholders of maximum value to which they are entitled. The Complaint alleges further that defendants have also breached their duties of loyalty and due care by not taking adequate measures to ensure that the interests of UnitedGlobal's public shareholders are properly protected from overreaching.
The complaint alleges that on January 18, 2005, UnitedGlobal announced that Liberty Media has made a proposal to acquire all of the Company's common stock that it does not already own at a price of approximately $3.65 billion (the "Buyout" or "Buyout Proposal"). UnitedGlobal shareholders would receive 0.2155 shares of Liberty Global Inc., the successor entity, for each share of UnitedGlobal, and investors in Liberty Media would get one share of Liberty Global Inc. for each share they hold. Liberty Media also offered a cash alternative of $9.58 per share UnitedGlobal stock, limited to 20% of the total offer. According to the complaint, the consideration offered in the Buyout is wholly inadequate and fails to offer fair value to the Company's shareholders for their equity interests in UnitedGlobal. In fact, the Company's stock traded in excess of the Buyout price as recently as the day prior to the announcement, and has been trading at or over that price for at least the past month. Moreover, the complaint alleges that Liberty Media had timed the proposal to freeze out UnitedGlobal's public shareholders in order to capture for itself UnitedGlobal's future potential without paying an adequate or fair price to the Company's public shareholders and that Liberty Media timed the announcement of the proposed buyout to place an artificial lid on the market price of UnitedGlobal's stock so that the market would not reflect UnitedGlobal's improving potential, thereby purporting to justify an unreasonably low price
