Madison Square Garden Entertainment's board of directors has agreed to settle an $85 million shareholder lawsuit alleging it failed to protect shareholder interests during its merger with MSG Networks.
The deal will be underwritten by the board's underwriters, according to a securities filing on Wednesday. There was no admission of guilt.
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A lawsuit filed in 2021 accused the Dolan family of masterminding the merger, "overpaying MSGN and harming MSGE's major shareholders" to advance their interests and increase their voting share. The shareholders said the deal was intended to finance, among other projects, the $1.9 billion MSG Sphere project in Las Vegas, which is expected to open this year. They also said the deal was unfairly priced because it benefited from the impact of the pandemic on MSGE's business, which mainly hosts live events. Three lawsuits were filed in Delaware Superior Court, which were later consolidated.
The merger was completed in an all-stock transaction in March 2021.
The Dolan family controls more than 70% of MSGE's voting rights. The company's board of directors, led by Chief Executive James Dolan, breached its fiduciary duty when it used control of the two companies to push for the merger, sending MSGE shares down nearly $10 after the announcement, which the complaint said blocked approval votes. Delaware settlement by judge. The filing comes a month after investors in both companies blocked efforts to do so. In this case, attorney Kathleen McCormick concluded that the Dolan family did not violate a state law that prohibits a shareholder from acquiring at least 15 percent of the voting rights within three years of acquiring the stock.
The contract is agreed upon by both parties and documented in a term sheet. No official reconciliation agreement was signed.
"The litigants have reached a preliminary agreement to settle the dispute on the terms and conditions specified in the binding term sheet, which will be included in the long-term settlement agreement," the securities depository said. "The settlement sheet states, among other things, that the lawsuit will be permanently dismissed, subject to MSG Entertainment paying $85 million, which will cover customary attorneys' fees and costs to be determined by the court."
In a statement, the spokesperson of MSGE said: "As set forth in the 8-K, this is a settlement that provides for $85 million in payments from the insurers to the company, and the Board of Directors has agreed to settle these claims without incurring any liability."
Joel Fleming, who represents the shareholders, declined to comment.
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