As previously announced, in September 2021, Barrack, Rodos & Bacine and two of its clients, along with three other firms and two other plaintiffs, were appointed to lead a consolidated stockholder class action brought on behalf of MSG Networks Inc. (MSGN) stockholders challenging the $900 million merger between Madison Square Garden Entertainment Corp. (MSGE) and MSGN, which is pending the Delaware Court of Chancery. BR&B is pleased to announce that the parties to the litigation reached an agreement in principle to settle the case for $48.5 million.
The case was brought on behalf of MSGN stockholders and alleged that the merger undervalued MSGN shareholders’ shares and was dominated by the Dolan Family Group, which held 75% of the voting power in both companies. The complaint alleged that the Dolan Family Group forced the acquisition of MSGN so that it could use MSGN’s cash flow to fund MSGE’s behemoth Las Vegas “Sphere” project, which is a giant coliseum intended to operate as a concert venue. The “Sphere” project has suffered with cost overruns and delays, which were exacerbated by the Covid-19 pandemic and the pandemic also severely undercut MSGE’s cash flow, which is almost exclusively based on hosting live events. The complaint alleged that, to find cash flow to fund these projects, the Dolan Family Group determined to have MSGE acquire MSGN, which had fared much better during the pandemic due to its business emphasis on television rights. When the merger was announced, the value of MSGN shares sank and many MSGN stockholders expressed outrage. However, due to the supermajority ownership of the Dolan Family Group in MSGN and the way the merger agreement was structured, the merger closed in July 2021.
Since being appointed as a lead counsel, Barrack, Rodos & Bacine and its co-lead counsel expeditiously prepared the case for trial, which was scheduled to begin on April 17, 2023. This involved reviewing hundreds of thousands of pages of discovery, taking scores of depositions and successfully moving to compel discovery in three separate motions. With only weeks remaining before trial, on April 6, 2023, the parties to the litigation reached an agreement in principle to settle the case on the terms and conditions set forth in a binding term sheet, which will be incorporated into a long-form settlement agreement. The Term Sheet provides for, among other things, the final dismissal of the litigation in exchange for a settlement payment to the plaintiffs and the class of $48.5 million. The proposed settlement is subject to the final approval of the Court of Chancery.