Shareholder Suit Asks for Injunction in New Frontier Deal
DENVER — A suit that seeks class-action status has been filed against New Frontier Media and LFP Broadcasting by a shareholder who alleges that LFP's proposed $33 million takeover of the company is "grossly inadequate."
Plaintiff Craig Telke's suit, filed at U.S. District Court in Denver yesterday, seeks an injunction over the proposed deal or rescinding it if the deal is consummated by its scheduled closing date of Nov. 27, as well as damages and attorneys fees.
The suit also names as defendants New Frontier Media Chairman Alan Isaacman and three company board members.
Telke, who alleges breaches of fiduciary duties "by means of an unfair process and for an unfair price," said that it was "unsurprising that Isaacman’s ascension to a leadership position within the company was concurrent with the sales process sharply favoring Flynt, and ending in a deal with the Flynt-controlled LFP Broadcasting."
The suit said that Isaacman, who was installed as New Frontier Media's chairman of the board in September, has a long-time relationship with LFP founder Larry Flynt, stemming back to 1988 when Isaacman represented him in the U.S. Supreme Court case between Flynt’s Hustler Magazine and Jerry Falwell.
Telke's accusations specifically allege that the defendants breached their fiduciary duty by agreeing to lock-up provisions that would dissuade other bidders by employing a strict no-solicitation provision that prevents New Frontier Media from soliciting other potential acquirers, a provision that provides LFP Broadcasting with three days to match any competing proposal in the event one is made and a provision that requires New Frontier Media to pay LFP a termination fee of $1 million in order to enter into a transaction with a superior bidder.
Last month, New Frontier Media announced that the adult transactional TV service had signed a definitive agreement to be acquired by LFP Broadcasting for $2.02 per common share in cash up front, or approximately $33 million, plus a contingent cash payment right for each common share.
LFP and New Frontier Media officials did not immediately respond for XBIZ comment on Friday.