Friday, May 17, 2024

CAPITALI$M IS ANTI DEMOCRACY

Analysis-Endeavor's $13 billion deal highlights push to sidestep minority shareholders


Endeavor Group Holdings logo is displayed on a screen on the floor of the NYSE in New York

Updated Fri, May 17, 2024

By Anirban Sen and Tom Hals

(Reuters) -Endeavor Group's decision to deny minority shareholders the ability to veto a $13 billion deal to take the entertainment conglomerate private is the latest example of a company's controlling investors risking lawsuits to avoid paying a higher deal price.

At stake is a corporate governance safeguard that reassures minority investors they are getting a fair price and protects companies' stock market valuations from taking a hit on concerns a deal would undervalue them, corporate lawyers and investment bankers say.

Endeavor agreed last month to be taken private by a consortium of its investors, led by private equity firm Silver Lake, which holds 71% of the voting stock in the company. It inked the deal without agreeing to hold a vote where a majority of the investors not participating in the consortium would have to approve it.

Without such a "majority-of-the-minority-investors" threshold, a deal vote becomes a formality, since the shareholders that control the company are also the ones buying out the minority investors.

A special committee of independent board directors that negotiated the deal on behalf of Endeavor tried unsuccessfully to convince Silver Lake to sign off on a majority-of-minorities shareholder vote, people familiar with the matter told Reuters.

Nearly a dozen lawyers and bankers told Reuters there is a growing realization among the controlling investors of companies that the financial benefit of depriving minority shareholders of a deal veto outweighs the legal risks.

"(The shareholder vote) opens the door to an activist who can say, 'I know you're negotiating with the special committee, but now you're going to negotiate with me, and I'm going to squeeze a second bite'," said Phillip Mills, an M&A partner at law firm Davis Polk.

Endeavor did not respond to requests for comment on the decision not to stage a shareholder vote on the deal. Silver Lake declined to comment.

Endeavor, run by Hollywood power broker Ari Emanuel, is well-known for representing film and television talent. It has grown to become a sports and entertainment behemoth through more than 20 acquisitions.

At least three other U.S. companies were taken private by majority shareholders over the last two years without seeking approval by minority investors.

These include buyout firm Thomas H. Lee's $2.5 billion deal in February to take medical equipment management company Agiliti private, and grill maker Weber's controlling shareholders led by BDT Capital acquiring it last year for $3.7 billion.

















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