Discovery sued WarnerMedia’s merger structure for more than $43 billion


Two pension funds sued Discovery Inc. in Delaware, seeking internal company records as they consider challenging its planned $43 billion merger with AT&T Inc. WarnerMedia division, which Discovery shareholders voted to approve early Friday.

The separate lawsuits, filed in the Delaware Chancery court, involve allegations that the transaction was designed to divert transaction value from Discovery’s public investors to a subsidiary of media giant Advance Publications Inc. through of a “substantial parallel payment” exploiting its multi-class capital structure.

The complaints were filed late Thursday, on the eve of an investor vote that moved the deal forward early Friday. Their aim, “in light of the impending shareholder vote”, was “to eliminate any doubt” that the pension funds would have “continued to request” documents from the company.

Discovery did not immediately respond to a request for comment on Friday. Advance, AT&T and WarnerMedia are not named as defendants.

The lawsuits, which do not allege wrongdoing, lack detail. They are requesting documents from Discovery under a state law giving company shareholders broad rights of inspection if they credibly suspect wrongdoing. Records cases often reflect an attempt to make claims for breach of trust.

Both pension funds – the Key West Police and Firefighters’ Pension Fund and the Bricklayers Pension Fund of Western Pennsylvania – own shares in Discovery. A third records inspection complaint was also filed under seal Thursday by an individual Discovery investor, likely over similar concerns.

Cause of Action: Section 220 of the Delaware General Corporations Act.

Relief: Disclosure of relevant company records; costs and fees.

Lawyers: Pension funds are represented by Bernstein Litowitz Berger & Grossmann LLP, Labaton Sucharow LLP, Friedman Oster & Tejtel PLLC, Kaskela Law LLC and Alfred G. Yates Jr. of Pittsburgh. The individual investor is represented by Cooch & Taylor PA.

The case is Key W. Police & Firefighters’ Pension Fund v. Discovery Inc., Del. Ch., n° 2022-0227, complaint filed on 3/10/22.


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