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Class-Action Suit Challenges LMI-UGC

Liberty Media International Inc.’s deal to acquire the rest of UnitedGlobalCom Inc., announced earlier Tuesday, is already facing a challenge.

Law firm Schiffrin & Barroway LLP announced Tuesday afternoon that it filed a class-action lawsuit in the Court of Chancery in the State of Delaware on behalf of all UGC shareholders “challenging the fairness of the recent merger proposal made by [LMI].”

Under terms of the deal, LMI and UGC each will become wholly owned subsidiaries of a newly created holding company, Liberty Global Inc.

Then each share of LMI will be exchanged for one share of Liberty Global. Each share of UGC will be exchanged for either 0.2115 shares of Liberty Global or $9.58 in cash. However, LMI will limit the cash awards to 20% of the total deal.

According to the complaint, the terms are wholly inadequate and fail to offer fair value to UGC shareholders for their equity interests. Schiffrin & Barroway added that UGC stock traded in excess of the buyout price as recently as Monday, the day prior to the announcement, and it has been trading at or over that price for at least the past month.

The complaint also alleged that LMI timed the proposal to freeze out UGC’s public shareholders in order to capture UGC’s future potential for itself without paying an adequate or fair price to its public shareholders, and that the timing placed an artificial lid on the market price of UGC’s stock so that the market would not reflect its improving potential.