Morgan Stanley Suing Saban Over Disney Deal

Morgan Stanley & Co. is suing children’s entertainment magnate Haim Saban for nearly $12 million that the investment banking firm says it is owed for advice given in last year’s sale of Fox Family Worldwide to Walt Disney Co.

The Los Angeles County Superior Court suit alleges breach of contract, failure to act in good faith and failure to pay for services rendered. The suit, filed by attorney Patricia L. Glaser, seeks payment of fees and unspecified damages.

The dispute apparently centers on whether Saban, when he hired Morgan Stanley to advise and assist in the sale of his 49.5% equity interest in Fox Family, agreed to pay the firm if any sale went through--or only if he exercised an option to sell his stake to Fox.

In a statement issued in New York, Saban accused Morgan Stanley of “overreaching,” adding that the firm was involved in “a different transaction.” He said that Morgan Stanley performed no services related to the sale to Disney.

Morgan Stanley disputes that point in its legal papers, saying it “provided its financial advice ... to Saban” in connection with the sale.

Morgan Stanley was first retained by Saban in October 2000. According to the suit, the firm engaged in extensive fee negotiations with Saban. They finally agreed that Morgan Stanley would receive a percentage scaled on the value of the final sale as an “incentive” to obtain the highest price for Saban.

Saban, who in 1995 helped launch Fox Family in a joint venture with Rupert Murdoch’s News Corp., held a 49.5% equity interest in the company. Saban, Murdoch and Disney’s Michael Eisner reached a “handshake agreement” in July to sell the company to Disney. A month later, according to the suit, Saban’s representatives informed Morgan Stanley’s managing director that Saban felt “personally” obligated to pay a fee to another advisor, Ed Aboodi and Alpine Capital, in connection with the deal. Morgan Stanley was asked to split its fee, which it refused to do.

The final deal went through in October, with a purchase price of $5.2 billion--including $2.9 billion in cash and assumption of $2.3 million in debt. Saban “and his affiliates” received about $1.4 billion, court papers say.