Monday, January 23, 2017

Shareholder suit focuses on Time Warner’s Non-GAAP merger metrics

By Mark S. Nelson, J.D.

Shareholders of Time Warner, Inc. allege the company’s board misled them by filing a materially deficient proxy that left out information about how the company calculated certain non-GAAP financial measures related to its proposed acquisition by AT&T Inc. The suit, filed in the federal district court in Manhattan, seeks to stop the upcoming shareholders’ vote scheduled for February 15 (Collura v. Time Warner, Inc., January 19, 2017).

According to the complaint, Time Warner’s definitive proxy lacked line items for some calculations and did not contain a reconciliation to GAAP. The complaint noted the recent focus by then-SEC Chair Mary Jo White and several of the agency’s accounting officials pressing companies to provide more detailed non-GAAP disclosures. Last May, the SEC staff published new and revised Compliance and Disclosure Interpretations on non-GAAP financial measures.

The complaint explained that Time Warner has a sizeable portfolio of video, television, and film assets in three divisions, which have become even more focused on video following recent spin-off transactions. The merger with AT&T is valued at more than $108 billion and would pay Time Warner’s shareholders $107.50 per share, with that amount split equally between cash and AT&T shares.

The case is No. 17-cv-00399.