Katzenberg sued over 'side deal' to Comcast-DreamWorks merger
By Tom Hals
WILMINGTON, Del. (Reuters) - Jeffrey Katzenberg, DreamWorks Animation SKG Inc's DWA.O chief executive, has been hit with a proposed class action lawsuit over what a minority shareholder called an "extraordinarily valuable" side deal he struck as part of the $3.8 billion sale of the studio to Comcast Corp (CMCSA.O: Quote).
Comcast, the owner of NBCUniversal and the largest U.S. cable distributor, agreed in April to pay $41 in cash per DreamWorks share and Katzenberg agreed to vote his controlling stock for the deal, assuring investor approval. The deal for is expected to close by the end of this year.
Monday's class action complaint by Ann Arbor City Employees Retirement System, a DreamWorks shareholder, claims Katzenberg breached his duty to minority shareholders by reaching a lucrative consulting deal for himself.
Once the deal closes, Katzenberg will become the chairman of DreamWorks New Media, which will oversee Awesomeness TV, an online studio for teen-oriented content, and a 3-D animation business.
While Katzenberg will only be paid $1 annually as a consultant, he will also collect 7 percent of the profits from DreamWorks New Media in perpetuity.
"Had Katzenberg not received the extraordinarily valuable side deal, Comcast would have been required to increase the merger price to secure Katzenberg’s support," said the complaint. The lawsuit was filed in the Court of Chancery in Delaware, where DreamWorks Animation is incorporated.
A DreamWorks spokesman declined to comment.
The lawsuit said the profit-sharing deal violates the DreamWorks charter, which requires minority shareholders receive the same treatment in a merger as Katzenberg. Continued...