• by David Goetzl  @dgoetzl, September 7, 2007

At least two class-action suits have been filed by shareholders in Hearst-Argyle, looking to derail Hearst Corp.'s efforts to buy out investors and take the station group private.

One case charges both Hearst Corp. and H-A board members with preparing to make the move by paying shareholders "an unfair price, significantly below the underlying and real value." Filed in Delaware Chancery Court, that suit--carrying the name of an Adele Brody (on behalf of others)--seeks a court injunction to stop the process, or a path to obtain damages should a deal go through.

Separately, the Sheet Metal Workers Pension Plan of Northern California has filed a similar case there.

A third case may also be working its way through the system in the Delaware court. A Philadelphia-area attorney, Brian Felgoise, announced Wednesday that he has launched a class-action suit with "the goal ... to seek the highest possible offer" from Hearst Corp.

Felgoise, a veteran class-action attorney with involvement in cases against companies such as Red Hat, Marsh & McLennan and Midway Games, would not comment. A representative at the Delaware court, where Felgoise said the case is pending, found no record of it--but it could take some time for it to be officially filed.

Hearst Corp. did not immediately respond to requests for comment.

The small-time investors who would participate in the "Brody" suit, as well as the California pension plan, aren't the only ones to express frustration with the proposed buyout. Marathon Partners L.P., with 90,000 shares, has asked the H-A board to reject Hearst Corp.'s offer.

Other institutional investors could follow in their opposition to the Hearst Corp. offer of $23.50 a share. The stock is currently trading at about $2 a share more. Hearst Corp. owns the majority of H-A, and has the bulk of the voting shares. It is seeking to take it private in a $600 million transaction.

The class-action suit led by Brody--where attorneys on her behalf either would not comment or could not be reached--also charges Hearst Corp. and the H-A board with trying to engineer the move without regard to shareholders' interests. By accepting an offer at a below-market price, they would be "in breach of (their) fiduciary duties," the suit alleges.

As with Marathon Partners' letter to the H-A board urging it to reject the offer, the Brody case asserts that H-A has considerable growth ahead of it. If the deal goes through, shareholders would be deprived of those benefits--which could come from increased retransmission consent revenues, profits in the digital space and an influx of political ad dollars in 2008.

H-A manages 29 TV stations (eight in top-25 markets) and holds a stake in Internet Broadcasting, which develops Web sites for local TV stations.