Charter investor sues over TWC/Bright House purchase, alleges Liberty is getting sweetheart deal

A Charter Communications (NASDAQ: CHTR) investor is trying to spur a class-action lawsuit against the company, alleging that Liberty Broadband has been granted unfairly discounted share prices as part of Charter's pending purchases of Time Warner Cable (NYSE: TWC) and Bright House Networks.

Charter investor Matthew Sciabacucchi initiated the class-action lawsuit against Liberty and its chief executive, John Malone, as well as Charter, through Boston law firm Block & Leviton. The suit was filed in Delaware Chancery Court.

"Liberty Broadband already owns a significant portion of Charter. What we're alleging is that the additional shares being issued and given to Liberty Broadband ($700 million worth in the Bright House transaction and $4.3 billion worth in the TWC Transaction) are unfairly discounted," said attorney Joel Fleming in an email to FierceCable.

For example, the suit alleges that Liberty's ability to purchase $4.3 billion of newly issued "New Charter" stock at a price of $176.95 is unfair because "the pre-announcement market price did not account for the fact that Charter's value would increase significantly as a result of its purchase of TWC and Bright House."

"We're also alleging that the transfer of a voting proxy (worth 6 percent to 7 percent of New Charter's total voting power) is unfair because it does not appear that Liberty Broadband is paying any additional consideration for that benefit," Fleming added. 

As part of the transaction, currently being reviewed by federal regulators, Liberty will also receive an irrevocable five-year voting proxy for 6 percent of the outstanding voting power of Charter. This will bring Liberty's total voting power to 25 percent and make it the only New Charter shareholder able to avoid significant dilution of its voting interest when the transaction is closed. Block & Levity attorneys claim Liberty is "paying nothing for this material benefit."

The suit alleges that Liberty and Charter directors breached their fiduciary duties to Charter shareholders by approving the "unfair" terms of the transaction. 

A Charter representative had no comment.

For more:
- read this press release from law firm Block & Leviton LLP

Related articles:
Charter beefs up D.C. lobbying ranks as merger reviews get underway
Charter says it will 'go further' than net neutrality for merger approval
FCC starts review of Charter's TWC and Bright House deals

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