Infoseek shareholders sue Disney
By Bloomberg News
Special to CNET News.com
July 12, 1999, 4:00 p.m. PT
WILMINGTON, Delaware--Disney was sued by Infoseek shareholders who contend the world's second-largest entertainment company's buyout of the Internet search company shortchanges other Infoseek stockholders.
Disney said today that it will buy the 57 percent of Infoseek that it doesn't already own--valued at about $1.7 billion at today's market price--by swapping 1.15 shares in the new company, called Go.com, for each Infoseek share. That will give Disney a 72 percent stake in Go.com.
In one of seven lawsuits filed in Delaware Chancery Court over the buyout, Infoseek shareholder Marvin Kotrin contends that Infoseek's board and Disney officials waited to do the swap until the value of the Internet company's shares dipped.
"Disney timed the transaction Quote Snapshot
July 13, 1999, 6:50 a.m. PT
Disney (Walt) DIS
27.5000 -0.3125 -1.12%
Infoseek Corp. SEEK
44.8125 -1.1250 -2.45%
by symbol by name
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to take advantage of the decline in the market price of Infoseek's stock," Kotrin said in the suit.
"The defendants have breached their [legal duties] to Infoseek shareholders by using their control of Infoseek to force [Kotrin and other holders] to exchange their equity interest in Infoseek and deprive [shareholders] of the fair value to which they are entitled," the suit added.
Infoseek officials weren't immediately available to comment on the suit.
Disney officials haven't seen the suits yet, "so it's not appropriate to comment on them," Disney spokesman Ken Green said.
Kotrin is asking a Delaware judge to block Disney's acquisition of Infoseek and to award Infoseek shareholders unspecified damages.
Such shareholder suits have become commonplace in the Delaware courts on the heels of the announcement of any large acquisition. They rarely impede the progress of a purchase, legal experts say.
Disney formed its Go Network search directory with Infoseek in January to challenge rivals such as Yahoo and Lycos.
Even though it's ranked as one of the top five sites on the Internet, the Go Network has been hampered by having two management teams and a lack of a clear focus, analysts have said.
Now Disney can package all of its online assets in one place with one management, analysts added. Shares of Disney rose 0.19 to 27.81 today, while shares of Infoseek fell 5.56 to 45.94.
Copyright 1999, Bloomberg L.P. All Rights Reserved.
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