Malone, directors agree to $87.5 million settlement

John Malone and his former colleagues on Charter Communications Inc.’s board agreed to an $87.5 million settlement of claims the billionaire unfairly benefited from the $79 billion purchase of Time Warner Cable he helped finance.

The accord disclosed Friday in a Delaware court filing resolves an investor’s lawsuit against directors of the secondlargest U.S. cable company over their handling of the 2016 deal. The money will come from insurance covering directors named in the lawsuit and will go into Charter’s coffers, not to the shareholder who filed the case.

Investor Matthew Sciabacucci accused the directors of allowing Malone, then on the board, to reap unfair tax benefits from stock he got in the merger through a side deal. Malone has been called the “cable cowboy” because of his extensive holdings in the industry.

Charter agreed to settle Sciabacucci’s claims “to avoid the burden, expense, disruption and distraction of further litigation,” according to court filings. The directors said they aren’t admitting any wrongdoing as part of the deal.

A spokesman for Malone, Witt Clay, declined to comment on the settlement. Cameron Blanchard, a Charter spokesman, didn’t immediately return emails Friday seeking comment.

The case had been set for trial last month before Delaware Chancery Court Judge Sam Glasscock III, but it was canceled.

Malone’s Liberty Broadband owned 26% of Charter, making it the cable company’s largest shareholder at the time of the Time Warner Cable acquisition.

Besides Malone, Liberty had the right to appoint three more directors to Charter’s board. The acquisition was financed partly with $ 4.3 billion from Liberty, while a related $10 billion deal for Bright House Networks LLC was paid for partly with an additional $700 million from Liberty.

Malone was accused of extracting special benefits other Time Warner Cable stockholders didn’t get. Those included receiving “all- stock consideration” for the Time Warner Cable shares Liberty held, as opposed to the stock-and-cash mix other investors got in the deal, according to court filings.

The shareholders also questioned whether the Liberty financings were needed in the first place, or were merely the product of Malone’s financial engineering to avoid regulatory constraints that may have come into play if Liberty’s stake in Charter fell below 25%.

Charter is based in Stamford, Conn. Liberty Media and other Malone companies are based in Douglas County.

The case is Sciabacucci vs. Liberty Broadband Corp., No. 11418, Delaware Chancery Court (Georgetown).