US: Court approves Verizon settlement over ‘merger tax’ objections

A New York state appeals court on Thursday said its door remains open for settlements of merger litigation where shareholders receive no money, approving an accord tied to Verizon Communications $130 billion buyout of Vodafone Group stake in their Verizon Wireless venture.

The Appellate Division, First Department in Manhattan said a lower court judge erred in rejecting a class-action settlement requiring Verizon to disclose more information to shareholders who thought it overpaid, and get a “fairness opinion” if it sold some of the venture’s assets. It also entitled the shareholders’ lawyers to up to $2 million for fees and expenses.

“Disclosure-only” settlements have lost favor in recent years, with critics saying they provide little benefit to shareholders and companies, while forcing companies to pay fees of shareholders’ lawyers in a so-called “merger tax.”

Judges in Delaware courts routinely approved such settlements for many years but have in recent decisions made clear those days are over, causing lawyers to file dozens of merger-related lawsuits in other courts instead.

The Verizon settlement drew objections from two shareholders, and was rejected in December 2014 by New York State Supreme Court Justice Melvin Schweitzer.

He said the accord failed to materially boost shareholder knowledge about the merger, which had closed in February 2014, and could impede the New York-based phone company’s ability to sell assets.

Full Content: Reuters

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