DreamWorks Animation SKG Inc. CEO Jeffrey Katzenberg was accused in a lawsuit filed by the Ann Arbor City Employees’ Retirement System of shafting minority shareholders in the company’s $3.8 billion sale to Comcast Corp. by striking a side deal to enrich himself.
DreamWorks’ investors will have no say in the approval of the deal because Mr. Katzenberg controls about 60% of the shareholder vote through his ownership of the company’s Class B shares, according to the complaint.
The pension fund claimed the side deal will give the entertainment executive stakes in two lucrative DreamWorks’ units after the merger closes. Mr. Katzenberg is set to receive 7% of the profits from AwesomenessTV and another unit in perpetuity, an arrangement the pension fund says is a breach of his fiduciary duties.
“Had Katzenberg not received the extraordinarily valuable side deal, Comcast would have been required to increase the merger price to secure Katzenberg’s support,” the pension fund said in the complaint filed Monday in Delaware Chancery Court. The fund compared the arrangement to an equity rollover without any of the normal downside risks.
Matthew Lifson, a spokesman for DreamWorks Animation, declined to comment on the lawsuit. Last week, Comcast Corp.’s NBCUniversal said the U.S. Justice Department cleared the company’s takeover of DreamWorks. NBCUniversal declined to comment on the lawsuit.
The Ann Arbor City Employees’ Retirement System has a $466 million defined benefit plan and $132 million VEBA trust.