The Ann Arbor City Employees Retirement System thinks DWA founder got way too sweet an agreement out of acquisition
Jeffrey Katzenberg found himself at the wrong end of a class action lawsuit filed Monday by the Ann Arbor City Employees Retirement System.
The plaintiff group claims the DreamWorks Animation founder got way too sweet a “side deal” when Comcast agreed to acquire his DWA. They accuse Katzenberg of being in “breaches of fiduciary duty as the company’s controlling stockholder, breach of contract, and breach of the implied covenant of good faith and fair dealing.”
The Michigan city’s retirement system is a DreamWorks shareholder, and believes the second-largest (Ann Daly is actually the biggest major direct shareholder, per Yahoo Finance) of them all, Katzenberg, violated those fiduciary duties by agreeing to a very personally lucrative plan.
Part of his deal sees Katzenberg consulting with Comcast on the development of AwesomenessTV and DWA Nova over a period of two years. In return, he gets just $1 per year, but 7 percent of their profits in perpetuity — that latter part is the obscene one, the plaintiff group says. Following the close of Comcast-DWA, Katzenberg is set to be chairman of DreamWorks New Media, which will contain those two companies under its umbrella.
Also Read: Comcast CEO Seeks to Calm DreamWorks Animation Staff at Town Hall
“The Profit-Sharing Arrangement is incredibly valuable to Katzenberg. AwesomenessTV has quadrupled in value in the last three years,” the filing states. “If AwesomenessTV continues along even a remotely similar trajectory, Katzenberg will be entitled to a substantial amount of cash pursuant to the Profit-Sharing Arrangement. If DWA Nova realizes its potential, the Profit-Sharing Arrangement only becomes more valuable.”
“The Side Deal constitutes disguised disparate merger consideration for Katzenberg,” the Delaware court document continued, calling this particular term of the deal “is so valuable that it cannot credibly be characterized as compensation for a two-year consulting contract.”
Furthermore, it violates the “the equivalent consideration provision” in DreamWorks’ own certificate of incorporation, plaintiffs say. They’re seeking recovery from an unspecified amount in damages.
Pamela Chelin contributed to this report.
7 People You Never Expected to Make Bank on the DreamWorks Animation Deal (Photos)
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Co-founders Jeffrey Katzenberg and Steven Spielberg enjoy the biggest individual stakes in DreamWork's Animation, with Katzenberg's holdings worth a whopping $408 million and Spielberg's worth $187.6 million after Comcast's takeover. But thanks to shares issued to directors and other former execs, a handful of other Hollywood names stand to make a pretty penny in the deal, too.
Getty Images
Jason Kilar, best known for being the CEO who built video streaming site Hulu from "Clown Co." into a legitimate force in online video, holds a stake thanks to his seat on the board. His holdings are worth nearly $1 million after the Comcast deal.
Getty ImagesLucian Grainge, who is the head of the world's biggest music label, Universal Music Group, also holds shares because of his board seat. His stake is also nearly $1 million.
Getty ImagesInvestment banker Mellody Hobson is DreamWorks Animations chairman since 2012, after eight years as a director. The investment banker, who also serves on the boards for two of George Lucas' foundations, has a stake worth $4.7 million.
Getty ImagesFormer Viacom CEO Tom Freston joined DreamWorks Animation's board nearly nine years ago. His stake is worth $2.7 million.
Getty ImagesEntertainment lawyer Skip Brittenham's eight years on the board have built him a stake worth $2.5 million after the Comcast deal.
Getty ImagesAnn Daly, pictured left, is a longtime exec at DreamWorks Animation, serving currently as president and previously as chief operating officer for a decade. After the Comcast deal, her stake in the company is worth $40 million.
Getty ImagesLew Coleman, another longtime exec at the studio, served for years as vice chairman and chief financial officer. His holdings will be worth $52.7 million when Comcast closes the deal.
Lew Coleman/LinkedIn
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Comcast’s $3.8 billion takeover of DreamWorks Animation will bring big hauls for Jeffrey Katzenberg, Steven Spielberg… and some people who will surprise you
Co-founders Jeffrey Katzenberg and Steven Spielberg enjoy the biggest individual stakes in DreamWork's Animation, with Katzenberg's holdings worth a whopping $408 million and Spielberg's worth $187.6 million after Comcast's takeover. But thanks to shares issued to directors and other former execs, a handful of other Hollywood names stand to make a pretty penny in the deal, too.