Madison Square Garden Entertainment’s Board Reaches $85M to Resolve Shareholder Suit

The Dolan family was accused of engineering the deal to benefit themselves at the expense of stockholders and help fund the $ 1.9 billion MSG Sphere project in Las Vegas. No wrongdoing was admitted.
Madison Square Garden Entertainment has settled a shareholder lawsuit for $ 85 million. It was accused of failing to protect stockholders when it merged with MSG Networks.

According to a Wednesday securities form, the deal will be covered under the board’s insurance. The committee did not admit to wrongdoing.

In 2021, the Dolan family was accused of engineering the merger and “overpaying MSGN” to dilute MSGE’s public stockholders. This was done to promote their interests and increase their voting share. The shareholders claimed that the deal was intended to finance, among other things, the $1.9bn MSGSphere project in Las Vegas, which will open later this year. The value was also alleged to have been done at an unfair cost because it took advantage of the pandemic’s effect on MSGE’s business, primarily hosting live events. Three lawsuits stood filed in Delaware Chancery Court and then consolidated.

In an all-stock transaction, the merger was completed on March 20, 211.

The Dolan family controls over 70% of MSGE’s voting power. Chief executive James Dolan and the company board abused their fiduciary duties by using their control over both companies to complete the merger. MSGE’s stock fell by almost $10 per share shortly after the announcement was made, according to the complaint. This complaint was filed one month after a Delaware judge stopped investors from blocking a vote to approve it. Kathleen McCormick, the Chancellor of the Dolan Family, found that they did not violate any state law that prohibits a shareholder holding a minimum of 15% from seeking an acquisition within three years of the purchase.

Both sides have agreed, and the terms sheet has been created. The formal stipulation has yet to be filed.

According to the securities filing, “The Litigation parties reached an deal in principle to settle the Litigation under the terms and conditions of a binding term sheet which will be incorporated in a long-form Settlement Agreement.” The Term Sheet allows for the final dismissal and payment to MSG Entertainment in exchange for $85 million. This amount will be subject to any customary reductions for attorneys’ fees.

A spokesperson for MSGE stated that the settlement involves an $85M payment to the company from the insurers. The board also agreed to settle the claims without admitting liability.