On August 14, 2023, Vice Chancellor Lori Will of the Delaware Court of Chancery approved a $48.5 million settlement of 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. In September 2021, Barrack, Rodos & Bacine and two of its clients, along with three other firms and two other plaintiffs, were appointed to lead the action. Plaintiffs 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 Las Vegas “Sphere” project, which is a giant coliseum intended to operate as a concert venue. The “Sphere” project has suffered cost overruns and delays, which were exacerbated by the Covid-19 pandemic that also severely undercut MSGE’s business, which is based almost exclusively on hosting live events. The complaint alleged that to find cash flow to fund these projects, the Dolan Family Group decided to have MSGE acquire MSGN, which had fared much better during the pandemic due to its focus on television rights. When the merger was announced, 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 Dolan Family Group was able to control the vote on the merger, which 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 fact witness depositions, taking and defending depositions of expert witnesses, and successfully moving to compel discovery in four separate motions. In early April, only weeks before trial was set to begin, the parties announced that they had settled the MSGN class action for a $48.5 Million payment to former MSGN stockholders. On August 14, 2023, the parties presented the settlement to Vice Chancellor Will, who approved the settlement from the bench. Vice Chancellor Will thoroughly evaluated the proposed settlement and stated, at the conclusion of the hearing to plaintiffs and to class counsel: “You should be very proud of the settlement here.”
Note that Class members do not need to file a proof of claim in order to participate in the settlement; rather, checks will be mailed automatically to the former holders of MSGN shares who participated in the merger’s exchange of MSGN shares for MSGE shares.
For more information, please contact BR&B attorneys Jeffrey W. Golan (jgolan@barrack.com) or Michael A. Toomey (mtoomey@barrack.com).