Will Barry Diller, the longtime senior executive of Expedia Group, be able to continue to control the company following a proposed “merger” that unwinds Diller’s longtime partnership with John Malone and his Liberty Media?
A shareholder lawsuit naming Expedia, Diller, and the rest of the board of directors, brought by Teamsters Union Local No. 142 Pension Fund, effectively seeks to block Diller’s potential voting control of Expedia Group after a merger with Liberty Expedia, and seeks monetary damages. The lawsuit, which is seeking class action status, alleges that Diller and Expedia Group board members’ breached their fiduciary responsibilities resulting from the terms of the deal. [See the lawsuit embedded below.]
Before we get into the lawsuit, let’s explain the context. Expedia Group is currently a controlled company with Diller being able to dictate virtually all of the company’s major decisions because of the voting power through an “irrevocable proxy” that Liberty Chairman John Malone and his wife granted to Diller over their shares in Liberty Expedia Holdings.
Expedia Group CEO Mark Okerstrom said in a statement a few months ago that the deal would simplify the company’s governance structure and reduce its share count.
The lawsuit said Liberty Expedia Group wants to execute the merger because changes to the company’s governance structure would mandate increased regulatory disclosures and other restrictions flowing out of the Investment Company Act of 1940, “and for other business reasons.”
There has been somewhat of a misconception about whether Expedia Group would transition from a controlled company to an independent corporation when the pending transaction between Expedia Group and Liberty Expedia Holdings goes through.
Yes, post-transaction, Diller would control only 29 percent of Expedia Group’s voting power because he and his family foundation would be entitled to convert 5.6 million common shares into Class B shares that come with 10 votes per share.
However, the merger agreements also give Diller the right for nine months after the merger to purchase or exchange common stock for an additional 7.2 million Class B shares, giving him control of Expedia Group with 48 percent or 49 percent voting power. Coupled with Diller’s alleged cozy and conflicted relationships with board members, according to the lawsuit, this would give him veto power over all major company decisions.
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