Despite the ticketing and concert industry seemingly defying the current recession, Ticketmaster Entertainment allegedly felt increasing pressured by the emergence of former client and rival Live Nation, and partially as a result it rushed into a merger with the company and downplayed its own value, the recent shareholder lawsuit against Ticketmaster states.

TicketNews obtained a copy of the lawsuit, which also claims that Ticketmaster was in violation of Nasdaq rules in January, prior to the merger, because the company did not have enough independent members on its Board of Directors. This happened following the appointment of company CEO Irving Azoff becoming a member. As a result, the board added a member, and then went on to vote to increase the board’s size to 13 members.

“Because the Director Defendants dominate and control the business and corporate affairs of Ticketmaster and because they are in possession of private corporate information concerning Ticketmaster’s assets, businesses and future prospects, there exists an imbalance and disparity of knowledge of economic power between the Defendants and the public stockholders of Ticketmaster,” the lawsuit states.

In addition, the lawsuit claims Ticketmaster’s prolific spending on acquisitions in 2007 and 2008 helped saddle the company with about $765 million in debt, or $13.72 per share, at the end of last year, which has weighed heavily on Ticketmaster’s fortunes. Among its acquisitions in 2008 were TicketsNow for $265 million and Azoff’s Front Line Management, for which the lawsuit claims the company paid $123 million in cash.

“As the negative reaction to the offer reflects, the consideration offered in the Proposed Transaction is grossly inadequate,” the lawsuit states, adding that as of November 7, 2008, there were 57,212,272 shares of Ticketmaster common stock outstanding. “According to the terms of the Proposed Transaction, and based on Live Nation’s price at the close of business on February 9, 2009, Ticketmaster shareholders would receive the equivalent price of approximately $6.67 per share. Based on Ticketmaster’s share price at the close of business on February 9, 2009, which was $6.57, shareholder would receive the infinitesimal premium of approximately 1.5 percent for the relinquishment of their shares.”

Ticketmaster also allegedly failed to consider alternatives to a sale/merger with Live Nation, such as remaining independent or selling itself to another buyer. The lawsuit seeks to block the proposed deal with Live Nation; award compensatory damages against the defendants; force Ticketmaster to disclose any special benefits the defendants may receive as a result of the deal; and other considerations.

“Over the past three (3) months, Ticketmaster’s stock price has lost over 40 percent of its value. More strikingly, over the past year, Ticketmaster’s stock price has lost almost 75 percent of its value ($23.71 per share on August 12, 2008, as opposed to $5.85 per share at the close of trading on February 2, 2009),” the lawsuit states. “Defendants have exploited this temporary downturn in order to secure benefits for themselves arising out of the Proposed Transaction, and to the exclusion and detriment of Ticketmaster’s public shareholders.”

It continues, “Moreover, insiders own approximately 30.84 percent of the outstanding stock of Ticketmaster. In addition, according to his deal with Ticketmaster for the purchase of Front Line Management Group, Inc., Irving Azoff owns approximately another $35 million worth of Ticketmaster stock, representing an additional 10 percent ownership (at $6.00 per share). The Ticketmaster by-laws, as they are currently written, require only that a simple majority of shareholder’s vote in favor of the Proposed Transaction in order for it to be approved. Accordingly, absent court intervention, the Proposed Transaction is essentially a fait accompli, given that only 10 percent of Ticketmaster’s public shareholders—many of which are Ticketmaster officers and employees and 30 percent of which are institutional investors—need to vote in favor of the Proposed Transaction in order for it to be approved.”

More TicketMaster/LiveNation merger news

Ticketmaster/Live Nation merger: Canadian officials look at TicketsNow 03/09/2009
Ticketmaster/Live Nation merger: NATB schedules meeting about the deal 03/04/2009
Ticketmaster/Live Nation merger: Live Nation reports 4Q loss 03/03/2009
Ticketmaster/Live Nation merger: Canadian AG investigates Ticketmaster 03/02/2009
Ticketmaster/Live Nation merger: National Association of Ticket Brokers irate 02/27/2009
Ticketmaster/Live Nation merger: Azoff would consider selling TicketsNow 02/26/2009
Ticketmaster/Live Nation merger: Azoff, Rapino and new speakers for House hearing 02/25/2009
Ticketmaster/Live Nation merger: Trouble with Leonard Cohen tickets on TicketsNow, and a third class action lawsuit 02/25/2009
Ticketmaster/Live Nation merger: Companies grilled by skeptical Senators 02/24/2009
Ticketmaster/Live Nation merger: Senate hearing to be webcast 02/24/2009
Ticketmaster/Live Nation merger: New Jersey AG settles investigation with Ticketmaster over Bruce Springsteen tickets 02/23/2009
Ticketmaster/Live Nation merger: Shareholder lawsuit details deal’s undervaluation 02/20/2009
Ticketmaster/Live Nation merger: Azoff, Rapino to testify at Senate hearing 02/20/2009
Ticketmaster/Live Nation merger: Dates set for congressional hearings 02/18/2009
Ticketmaster/Live Nation merger: Ticketmaster shareholders sue to block the proposed deal 02/17/2009
Ticketmaster/Live Nation merger: Law firm launches investigation into TicketsNow 02/16/2009
Ticketmaster/Live Nation merger: Live Nation expects strong 4th Quarter 02/13/2009
Ticketmaster/Live Nation merger: major shareholder may oppose the deal 02/13/2009
Ticketmaster faces second class action lawsuit in Canada 02/12/2009
Ticketmaster/Live Nation merger: stocks take a beating 02/12/2009
Visa fires back at Ticketmaster for ‘glitch’ statement 02/11/2009
U.S. Justice Department launches review of Live Nation, Ticketmaster merger 02/11/2009
LiveStub CEO Michael Hershfield discusses the Live Nation/Ticketmaster merger 02/11/2009
Ticketmaster and Live Nation claim now was the best time to merge 02/10/2009
Live Nation and Ticketmaster Entertainment agree to unprecedented merger 02/10/2009
Ticketmaster, Live Nation merger expected within a day 02/09/2009
Ticketmaster, TicketsNow face $500 million class action suit in Canada 02/09/2009
Connecticut AG wants review of proposed Ticketmaster, Live Nation merger 02/06/2009
Opposition mounts against proposed merger of Ticketmaster and Live Nation 02/05/2009
Ticketmaster apologizes to Bruce Springsteen and his fans over ticket mix-up 02/05/2009
Bruce Springsteen rips Ticketmaster over tickets and proposed Live Nation merger 02/04/2009
TicketNetwork CEO Don Vaccaro speaks with Fox Business about Live Nation/Ticketmaster merger 02/04/2009
Live Nation and Ticketmaster Entertainment talk merger 02/04/2009
Gametime ad touting concert tickets for 60% off prices at competing websites