Shareholder Sues DirecTV and Its Directors to Block AT&T Acquisition

Is AT&T getting a sweetheart deal for DirecTV? In a proposed class-action lawsuit filed Thursday, a DirecTV shareholder contends AT&T may be scooping up the television powerhouse on the cheap.

Teresa Silvestri has asked the Superior Court of California in Los Angeles County to prevent the $48.5 billion deal from being consummated.

She has accused the directors of the satellite TV company of breaching their fiduciary duties of due care, disclosure, good faith and loyalty by failing to ensure shareholders obtain the maximum purchase price for the company.

Dallas-based AT&T has agreed to acquire DirecTV common stock for $28.50 per share in cash and $66.50 per share in AT&T stock.

Silvestri contended the $95 per share merger price undervalues DirecTV, the El Segundo, Calif.-based satellite-TV provider whose U.S. subscribership totaled 20.27 million customers at the end of the first quarter. She cited analysts’ expectations setting a price target for DirecTV shares of between $96 and $100 plus speculation from an analyst that rival Dish Network could bid $120 per share or $30 per share and cash for the satellite TV provider.

“The merger consideration also fails to adequately compensate DirecTV shareholders for the inherent synergistic value that the company brings to AT&T in a strategic combination,” Silvestri declared through her attorney Evan Smith of Brodsky & Smith LLC.

Although DirecTV declined to comment on the specific details of the complaint, the company noted the acquisition “will provide our shareholders with a 30 percent premium to DirecTV’s unaffected stock price and the opportunity to participate in the significant upside potential of this strategic combination.”

Silvestri also accused DirecTV of agreeing to certain provisions in the merger “that unduly benefit AT&T by making an alternative transaction either prohibitively expensive or otherwise impossible.” For instance, Silvestri cited a termination fee of $1.44 billion that DirecTV agreed to pay AT&T if the deal collapses under certain circumstances.

She also claimed the merger agreement reduces the possibility of DirecTV receiving a superior offer from an unsolicited bidder because DirecTV has agreed to furnish AT&T information so it could match or top another offer.

“Thus, a rival bidder is not likely to emerge with the cards stacked so much in favor of AT&T,” the lawsuit asserted. first reported on the suit, which is available here.  

The lawsuit also names as defendants AT&T, a wholly-owned subsidiary and 12 directors of DirecTV, including Michael White, the chairman, president and CEO of the company. AT&T did not immediately respond to a request for comment on the lawsuit, which accused the company of assisting DirecTV’s directors in breaching their fiduciary duties.

The lawsuit seeks a declaration that the acquisition is unlawful and unenforceable. Plaintiff also has requested an injunction preventing the companies from completing the merger and an order directing the satellite TV provider to negotiate a deal that is in shareholders’ best interests.

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