BellSouth investors against sale

Believing that AT&T's offer for BellSouth is not competitive, BellSouth's shareholders file a lawsuit seeking to halt the sale.

BY LAURENCE VIELE DAVIDSON AND J. KYLE FOSTER

Bloomberg News

ATLANTA - BellSouth Corp. shareholders are suing to stop the company's acquisition by AT&T, saying the $67 billion sale price is too low.

The suit, filed in state court in Atlanta, accuses BellSouth Chief Executive Officer Duane Ackerman, President Mark Feidler and board members of violating their fiduciary duty to investors by failing to seek a better offer. The plaintiffs are seeking class-action status on behalf of all BellSouth shareholders.

''The terms of the proposed transaction were not the result of an auction process or active market check,'' according to the complaint, filed March 9 in Fulton County Superior Court. ``It was arrived at without a full and thorough investigation by the individual defendants of strategic alternatives and the proposed transaction is intrinsically unfair and inadequate.''

AT&T, based in San Antonio, is buying BellSouth to help battle competition from cable and plans about 10,000 job cuts through 2009, after closing the deal next year. AT&T is the largest U.S. telephone company.

BellSouth spokesman Jeff Battcher said the company will fight the suit. ''BellSouth feels this lawsuit is completely meritless,'' he said.

AT&T and BellSouth had almost $100 billion in total revenue last year and today have a stock market value of more than $160 billion, dwarfing the $98 billion of No. 2 Verizon Communications. Sales at the new company are expected to return to growth in 2007, a year earlier than AT&T forecast on Jan. 31.

BellSouth shareholders say the sale price gives them a 17.9 percent premium on their stock, or $37.09 per share, which isn't enough.

A $1.7 billion termination fee included in the acquisition agreement is so costly that it discourages competitors from trying to top AT&T's offer, the suit alleged.

In addition to asking the court to halt the sale, investors are seeking a jury trial, unspecified damages and attorneys' fees.