Knology Inc. (KNOL:US), a cable-television operator in the U.S. Southeast and Midwest, was sued by a shareholder claiming WideOpenWest Finance LLC’s $1.5 billion takeover offer undervalues the company.
WideOpenWest, controlled by Avista Capital Partners LP, is offering $19.75 a share in cash, according to an April 18 statement. The bid is 34 percent more than Knology’s average three-month closing price before the Wall Street Journal reported Feb. 28 that the company was considering offers.
“Given Knology’s recent strong performance as well as its future growth prospects, the consideration shareholders will receive is inadequate,” Sheila Lewis, a Knology investor, said in a complaint filed yesterday in Delaware Chancery Court in Wilmington. She seeks to represent shareholders as a group.
M. Todd Holt, president of West Point, Georgia-based Knology, wasn’t immediately available to respond to a phone call and e-mail seeking comment on the lawsuit.
Knology rose 0.4 percent to $19.52 in Nasdaq Stock Market trading.
The acquisition would give Englewood, Colorado-based WideOpenWest, known as WOW!, a larger customer base to bolster its position in talks with content providers. The combined company would have more than 800,000 subscribers in 13 states.
Knology’s financial advisers -- an affiliate of Credit Suisse Group AG (CSGN) and a unit of Bank of America Corp. (BAC:US)’s Merrill Lynch -- failed to act impartially or in the best interest of shareholders, Lewis said.
Both had “material conflicts of interest” that prevented them from getting the best price for Knology, “thus tainting the sales process,” she said. Neither was sued in the complaint.
Credit Suisse owns an indirect stake in WOW! through its holdings in Avista, Lewis said. Merrill Lynch provided services to Avista at least five times during the past two years, according to court documents.
William Halldin, a spokesman for Charlotte, North Carolina- based Bank of America, and Jack Grone, a spokesman for Zurich- based Credit Suisse, both declined to comment on Lewis’s complaint.
The case is Lewis v. Knology Inc., CA7592, Delaware Chancery Court (Wilmington).
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