Silver Lake Technology Management LLC has sued billionaire Carl Icahn and dozens of hedge funds in Delaware, seeking to block their use of an appraisal action tactic related to Endeavor's 2025 acquisition. The private equity firm argues these funds are opportunistic arbitrageurs, not dissenting investors, and seeks to prevent potentially large payouts.
The lawsuit highlights a legal battle over shareholder rights and corporate deal-making tactics, potentially impacting the cost of mergers and acquisitions and the strategies employed by activist investors and hedge funds.
Private equity firm Silver Lake Technology Management LLC has filed a lawsuit in Delaware's Court of Chancery against billionaire Carl Icahn and dozens of hedge funds. The suit aims to prevent these funds from utilizing an appraisal action, a legal tactic that allows unhappy investors to seek a higher valuation for their shares in a merger. Silver Lake is seeking a ruling that funds acquiring Endeavor stock after the deal's announcement in 2024 are not entitled to appraisal rights.
Silver Lake announced its intention to acquire Endeavor for $13 billion, or $27.50 per share, in 2024. Following this announcement, hedge funds specializing in appraisal arbitrage began acquiring Endeavor stock, even at prices exceeding the proposed acquisition value. Silver Lake argues these funds are "opportunistic arbitrageurs" and not genuine dissenting investors, and that their actions could lead to payouts of hundreds of millions of dollars above the deal price.
Carl Icahn has not joined the appraisal action but has filed a separate class action lawsuit. Icahn's suit alleges that Endeavor's management and Silver Lake breached their fiduciary duties and improperly transferred company assets for insider benefit. Silver Lake, in turn, has accused Icahn and the appraisal hedge funds of coordinating their stock purchases, allegations that both parties deny. The lawsuit also claims some funds failed to make proper disclosures regarding their Endeavor stock acquisitions.
Recent changes to Delaware's corporate law, enacted last year, have made it more difficult to sue over deals involving large shareholders and to access corporate documents for conflict-of-interest investigations. Despite these changes, Delaware lawyers have observed an increase in appraisal cases, potentially due to perceived undervaluation of deals or the difficulty of pursuing traditional fiduciary duty lawsuits.
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