DreamWorks chief sued over Comcast sale

Dreamworks sign Image copyright Getty Images

The chief executive of DreamWorks Animation, Jeffrey Katzenberg, is facing a lawsuit from minority investors over the sale to Comcast.

Shareholders allege Mr Katzenberg was encouraged to vote for the $3.8bn (£2.8bn) sale to Comcast because of an "extraordinarily valuable side deal".

Once the sale completes, Mr Katzenberg will be chairman, earning a token $1 in fees - plus 7% of DreamWorks' profits.

Dreamworks declined to comment on the case.

Comcast, owner of NBC Universal, and DreamWorks struck the deal in April. DreamWorks Animation is the company behind film franchises such as Shrek and Kung Fu Panda.

Mr Katzenberg owns 60% of DreamWorks and pledged to vote in support of the sale, guaranteeing the deal would go through.

In court papers filed on Monday, minority shareholders Ann Arbor City Employees Retirement System (AACERS) alleged that without this support Comcast would have made a higher offer.

"Had [Mr] Katzenberg not received the extraordinarily valuable side deal, Comcast would have been required to increase the merger price to secure [Mr] Katzenberg's support."

AACERS is leading the class action lawsuit, which could be joined by all minority investors.

Class action cases apply to an entire group impacted by the defendant, and damages are split between them.

The lawsuit claims that the deal between Comcast and Mr Katzenberg violates DreamWorks Animation's charter requiring that minority shareholders receive the same benefit from a deal as the majority holder.

Image copyright Getty Images
Image caption Jeffrey Katzenberg with DreamWorks Animation's Kun Fun Panda

According to the lawsuit, during negotiations Comcast said it would raise its offer from $35 per share to $41, only if Mr Katzenberg gave written consent for the deal.

AACERS claims this created a conflict of interest because the chief executive was able to negotiate the terms of his role prior to the deal being completed..

Mr Katzenberg was one of the founding partners of DreamWorks Studio in 1994 - along with Steven Spielberg and David Geffen. Ten years later DreamWorks Animation was separated as a stand-alone business to be run by Mr Katzenberg.

After the Comcast deal closes, Mr Katzenberg will become the chairman of DreamWorks New Media. He will be in charge of overseeing the 3-D animation business and Awesomeness TV, the teen-focused entertainment arm.

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