WASHINGTON-Motient Corp.’s largest shareholder filed a new lawsuit against the wireless company, alleging in a Texas court that a recent transaction involving mobile satellite service ownership changes violates federal securities law.
“Highland is certainly willing to consider strategic transactions that directly benefit shareholders, but we strongly oppose Motient’s proposed transaction with SkyTerra. We believe the proposed transaction is structurally and financially flawed and raises serious governance concerns,” said Highland Capital Management L.P.
“The latest lawsuit filed by Mr. Dondero and his hedge fund, Highland Capital, is without merit and just another desperate attempt by Mr. Dondero to mislead shareholders and deny them the long-term value our transaction concerning MSV and TerreStar would create. We look forward to vigorously defending the company against their allegations and continuing to protect the interests of our shareholders,” Motient said.
Highland, a Dallas-based hedge fund, owns 14 percent of Motient. Highland President James Dondero, who has accused Motient of gross mismanagement and various improprieties, is engaged in a proxy fight to get a new, larger slate of directors elected to the company’s board. Motient earlier this year said five of its 10 directors would not seek re-election. Motient’s annual shareholders’ meeting is set for July 12.
In May, Motient announced a series of transactions whereby SkyTerra Communications Inc. would own 70 percent of Mobile Satellite Ventures L.P., an MSS licensee with Federal Communications Commission approval to combine L-band (1.5 GHz) satellite operations with land-based cellular networks.
Under the plan, Motient would increase to 74 percent its stake in TerreStar Networks Inc., an S-band (2 GHz) MSS licensee also planning to construct and operate a hybrid satellite-terrestrial communications system. Motient presently owns a 49-percent stake in MSV and a 61-percent stake in TerreStar. The ownership realignment requires federal approval.
“Under the terms of the transaction, Motient and its stockholders are forced to incur substantial tax expense and we have seen no evidence that Motient will receive a control premium or significant representation on the SkyTerra board. While Motient stockholders have received no specific information regarding how the SkyTerra transaction achieves the `value maximization’ promised by Motient, we are certain of the near-term economic harm. Simply put, Highland believes it is unacceptable for Motient stockholders to incur these significant costs without knowing what long-term economic benefit they will receive in return,” Highland said.
Highland’s lawsuit alleges Motient’s proposed deal with SkyTerra violates the Investment Company Act of 1940 because the firm did not obtain an opinion from the Securities and Exchange Commission or an appropriate court stating it is legally able to enter into a transaction with SkyTerra.
As such, Highland said it is asking the court to, among other things, declare the proposed transaction unenforceable, rescind the SkyTerra agreement, and enjoin the registration statement required by the SkyTerra agreements.
Highland also named Capital Technology Advisors Inc. in the suit and seeks rescission of Motient’s contracts with CTA, based on information and belief that CTA is Motient’s key advisor on the SkyTerra agreement.
