WILMINGTON, Del. – Two USA Networks Inc. shareholders have sued to block what they allege is an ``unfair'' deal to sell USA's entertainment assets to French media giant Vivendi Universal SA for about $10.3 billion.
In papers filed on Wednesday in the Delaware Court of Chancery, shareholders Ruth and Abraham Ringel said USA's board breached its fiduciary duty by failing to market and auction the company for the highest and best bid in accordance with the ''Revlon'' precedent of Delaware corporate law.
They also claim that the USA board and its chairman, Barry Diller, allegedly ``usurped'' for themselves a business opportunity belonging to the company and thousands of holders of its 738 million shares of common stock.
``The break-up of the company, through the so-called joint venture, is wrongful, unfair and harmful to USA and USA's public shareholders and represents an attempt by Diller and the defendants to aggrandize their personal and financial positions and interests,'' the documents stated.
The deal provides Vivendi a much-sought U.S. distribution outlet for its film and TV assets. Vivendi will own a 93 percent stake in USA Networks, which will be renamed USA Interactive. USA Networks will retain a 5.4 percent interest in the joint venture.
For its stake, Vivendi will pay $7 billion in USA stock it already owns; $1.65 billion in Vivendi treasury stock for Liberty Media Corp.'s 21 percent holdings in USA; and $1.62 billion in cash.
Cable magnate John Malone and his Liberty cable group, also named as defendants, will end up with a 3.6 percent stake in Vivendi, and Diller will own 1.5 percent of the new venture.
The Ringels' seek class-action status to represent all public USA holders and to act derivatively on behalf of USA itself.
Vivendi and Liberty are alleged in the lawsuit to have knowingly assisted the USA board in the breach of its fiduciary duties.
The lawsuit also seeks unspecified damages for the class and for USA.
A USA spokeswoman said the company declined to comment.