Shareholders challenge Times Mirror cable deal

June 09, 1994|By Bloomberg Business News Sun Staff Writer David Conn contributed to this article.

The Times Mirror Co. is being sued by shareholders who claim the media company's agreement to sell its cable operations unfairly favors the controlling Chandler family.

The lawsuits, filed in Delaware Chancery Court this week, contend the company's board breached its fiduciary duties by not treating the Chandler family, which controls a majority of Times Mirror voting shares, and public shareholders "equally and fairly."

"It's a legal matter. We're studying it, and we can't comment any further," said Stephen C. Meier, Times Mirror's vice president for administration and community affairs. Mr. Meier said the company knew of seven lawsuits that had been filed.

Cox officials could not be reached.

Times Mirror shares closed down 75 cents at $31.625 yesterday, below the $32 a share at which the company was trading before the deal was announced. The stock reached $35.75 on Friday, the day the Cox announcement was made.

Times Mirror announced Friday that it would sell its cable business to Cox Cable Communications Inc. for $2.3 billion. The company subsequently said it expects to cut its dividend to a range of between one-fifth and one-third of its current level after the transaction. The stock recently paid a quarterly dividend of 27 cents, or $1.08 a year.

The transaction would transfer Times Mirror's cable operations to an entity that would be 80 percent owned by Cox. Under the proposal, Times Mirror common shareholders, other than the Chandler trusts, would receive a share in the new cable operations. The Chandler trusts would receive new nonvoting preferred stock with a stated dividend, rather than common shares, which would preserve their roughly $42.5 million in annual dividends.

The lawsuits, which say shareholders were unfairly denied any voice in structuring the proposed merger, seek to derail the transaction and force the Times Mirror board to renegotiate its terms.

Thomas Unterman, the company's general counsel, said previously that offering the public shareholders a voice was considered but that Cox, as well as other prospective buyers of the Times Mirror cable operation, opposed it because they wanted to be sure the deal would be completed.

Mr. Unterman and Robert F. Erburu, chairman and chief executive of Times Mirror, said the deal's tax-free status would have been lost had shareholders been offered the choice of options: the one that gives them a stake in Cox Cable or the one that provides higher income without the risk of cable operations.

Named as defendants in the lawsuits, which are seeking class action status, are Los Angeles-based Times Mirror and its board members. Atlanta-based Cox Enterprises Inc., parent company of Cox Cable, is named as a defendant that "aided and abetted" the alleged scheme.

In addition to its cable holdings, Times Mirror publishes newspapers including the Los Angeles Times, Newsday and The Baltimore Sun, magazines such as Field & Stream, Outdoor Life and the Sporting News, and legal and professional publishing concerns. The company has about 27,000 employees; about 1,800 work at The Baltimore Sun.

Atlanta-based Cox is one of the country's largest private companies, with more than $3 billion in annual revenue. It owns 17 newspapers, including the Atlanta Journal & Constitution.

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