DreamWorks’ Katzenberg Sued Over Comcast Deal by Fund

  • Ann Arbor employee fund says side deal is fiduciary breach
  • Executive set to receive profits in two Dreamworks’ units

DreamWorks Animation SKG Inc. Chief Executive Officer Jeffrey Katzenberg was accused in a lawsuit of shafting minority shareholders in the company’s $3.8 billion sale to Comcast Corp. by striking a side deal to enrich himself.

DreamWorks’ investors will have no say in the approval of the deal because Katzenberg controls about 60 percent of the shareholder vote through his ownership of the company’s Class B shares, according to the complaint.

The Ann Arbor City Employees Retirement System’s pension fund claimed the side deal will give the entertainment executive stakes in two lucrative DreamWorks’ units after the merger closes. Katzenberg is set to receive 7 percent of the profits from AwesomenessTV and another unit in perpetuity, an arrangement that pension fund says is a breach of his fiduciary duties.

“Had Katzenberg not received the extraordinarily valuable side deal, Comcast would have been required to increase the merger price to secure Katzenberg’s support,” the pension fund said in the complaint filed Monday in Delaware Chancery Court. The fund compared the arrangement to an equity rollover without any of the normal downside risks.

Matthew Lifson, a spokesman for DreamWorks Animation, declined to comment on the lawsuit. Last week, Comcast Corp.’s NBCUniversal said the U.S. Justice Department cleared the company’s takeover of DreamWorks. NBCUniversal declined to comment on the lawsuit.

The animation studio struggled in the year before it announced the deal, reducing its annual film output and cutting jobs. As one of the last independent players in Hollywood, rumors of a potential sale had followed the maker of "Shrek" for years prior to the Comcast merger, announced in April.

The case is Ann Arbor City Employees Retirement System v. Katzenberg, 12507-CB, Delaware Court of Chancery (Wilmington).

Before it's here, it's on the Bloomberg Terminal.