N2K Holders Sue to Block Rival CDnow's Acquisition (Update1)
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Wilmington, Delaware, Oct. 28 (Bloomberg) -- N2K Inc. shareholders sued to block the No. 2 online music retailer's acquisition by bigger rival CDnow Inc. for $111.4 million in stock, saying N2K officials should have shopped for a better price.
Jenkintown, Pennsylvania-based CDnow said last week it will issue 0.83 share for each share of N2K, valuing N2K at $7.83 per share based on CDnow's 9 7/16 closing price the day before the offer was announced -- a 42 percent premium over N2K's closing price of 5 1/2 that day.
Both companies reported third-quarter losses attributed to the costs of competing with each other and Amazon.com, a highly touted Internet bookseller that began selling music on its Web site earlier this year. That's why they agreed to join forces, officials of N2K and CDnow said.
But investors paid $19-per share for N2K stock when it was initially sold in October 1997, so the $7.83 offer is ''unfair and grossly inadequate,'' N2K shareholder Morris Rubin said in his suit filed in Delaware Chancery Court in Wilmington.
The offer doesn't take into account N2K's growth prospects in the emerging world of Internet retailing and N2K officials could have gotten a better deal for shareholders by opening the company up to other offers, the suit said.
''If consummated, the transaction will deny (shareholders) the right to share proportionately in the true value of N2K's assets, businesses and future growth,'' Rubin said in the suit, which seeks class-action status.
Rubin is asking a Delaware judge to block the sale until N2K shops around for other offers for the company and pay unspecified damages.
Officials of CDnow and New York-based N2K declined to comment on the suit. |
