MSG merger vote gets greenlight from Delaware Chancery Court judge

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A sign welcoming back fans prior to the start of the game between the New York Knicks and the Golden State Warriors at Madison Square Garden. Wendell Cruz-USA TODAY Sports

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  • Chancellor Kathaleen McCormick rejects requests to block vote
  • Shareholder vote faced two proposed class actions

(Reuters) - MSG Networks Inc can proceed with a shareholder vote on its plans to merge into Madison Square Garden Entertainment Corp, a Delaware Chancery Court judge ruled late Friday afternoon.

Chancellor Kathaleen McCormick rejected attempts from both companies' investors to block the vote, arguing that the proposed business combination did not violate the state's corporate law.

A spokesperson for MSG Entertainment said in a statement that the company is "pleased" with the ruling and continues "to believe the transaction benefits all shareholders."

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MSG Networks and MSG Entertainment announced in March that they would combine through an all-stock transaction, after which MSG Networks would become a subsidiary of MSG Entertainment.

MSG Networks investor Timothy Leisz later hit the sports broadcasting company and its board with a proposed class action in June, claiming the deal unfairly benefited the Dolan family, which controls both MSG Networks and MSG Entertainment.

Investors Hollywood Firefighters’ Pension Fund and James Gould filed a proposed class action derivative suit against MSG Entertainment's board and MSG Networks later that month.

In Friday's ruling, McCormick said that the merger did not violate a state law that prohibits a shareholder with a 15% voting stake from pursing a merger with the company within three years of when the shareholder acquired that equity. That three-year period ended for the Dolan family in 2013, the judge said.

Attorneys for the plaintiffs did not immediately respond to requests for comment on Friday.

The cases are Hollywood Firefighters’ Pension Fund et al. v. James L. Dolan et al, No. 2021-0468, and Leisz v. MSG Networks Inc et al, 2021-0504, in the Chancery Court of Delaware.

For Hollywood Firefighters' Pension Fund: Eric Zagar of Kessler Topaz Meltzer & Check; and Gregory Varallo of Bernstein Litowitz Berger & Grossmann

For Gould: Mark Lebovitch and Gregory Varallo of Bernstein Litowitz Berger & Grossmann

For Leisz: Michael Palestina of Kahn Swick & Foto; Juan Monteverde of Monteverde & Associates; and Blake Bennett of Cooch & Taylor

For MSG Networks: Andrew Ditchfield of Davis Polk & Wardwell; and Kevin Coen of Morris, Nichols, Arsht & Tunnell

For Dolan: Maeve O'Connor and Elliot Greenfield of Debevoise & Plimpton; and Brian Ralston of Potter Anderson & Corroon

For MSG Entertainment: William Savitt and Ryan McLeod of Wachtell, Lipton, Rosen & Katz; and Elena Norman of Young Conaway Stargatt & Taylor

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Sierra Jackson reports on legal matters in major mergers and acquisitions, including deal work, litigation and regulatory changes.