TCI, Late Founder’s Family Settle Legal Dispute
Tele-Communications Inc. and the family of its late founder, Bob Magness, on Monday resolved a bitter legal feud that had cast a cloud over Chief Executive John Malone’s grip on the nation’s largest cable company.
Under the agreement, Malone strengthens his hold over the company, with the final say over about 40% of the voting shares. TCI will also make huge, one-time payments to Malone and to the Magness heirs for the right to eventually buy their “super-voting” shares, which are key to controlling the company.
The lawsuit was brought in October by Magness’ two adult sons, Gary and Kim, against TCI, Malone and the estate’s two executors. It sought to rescind a $529-million sale of Magness shares last summer that affirmed Malone’s control over the Englewood, Colo.-based company.
Magness died of cancer in late 1996, leaving a $1-billion estate--the largest in Colorado history--with a looming $300-million tax bill that forced the sale of super-voting shares that control more than a quarter of the vote.
Half of those super-voting shares, a total of 16 million worth more than $430 million, will be returned to the Magness heirs as part of the agreement. Those shares, which were sold at $16.52, traded Monday at $28.38, up 6 cents on Nasdaq.
“The Magness brothers have restored more than $300 million to the estate,” said John Moorhead, chief attorney representing the Magness brothers for Baker & Hostetler in Denver.
The sons contended that executors could have fetched a higher price for those shares through an auction and that they put Malone’s interests over the estate’s because of such factors as a lucrative consulting contract.
The two executors, Donne Fisher and Daniel Ritchie, resigned as a result of the settlement, though each will receive $1.5 million as part of the settlement.
The company also agreed to pay the Magness family $124 million for the rights to buy its 34 million super-voting shares, while paying Malone $150 million for rights to buy his 42 million super-voting shares.
TCI said the payment is necessary to prevent a third party from bidding up the value of the super-voting B shares to the detriment of A shares with lower voting power.
“We grew concerned that a handful of shares could have shifted control of the company,” said Leo Hindery, president of TCI, in a conference call Monday. “Such an outcome would not be in the interest of all shareholders. We wanted to preserve the status quo, with the company in Malone’s hands.”
A separate lawsuit by Magness’ wife seeking half of the estate has also been settled for undisclosed terms, the company said.