EXCLUSIVE: Ron Burkle’s Yucaipa Companies has filed suit against Lantern Capital today accusing the private equity firm of fraud, breach of contract and other charges in connection with the purchase of The Weinstein Company assets.
Looking for a wide range of damages, Yucaipa is claiming it shared confidential information with Lantern as the Dallas-based company positioned itself as the stalking horse bidder for TWC’s assets. Now, Burkle’s side says Lantern is refusing to pay a 2% transaction fee that was promised in exchange for its expertise.
“It appears that Lantern never intended to honor the oral agreement, but only fraudulently induced Yucaipa to enter into the oral agreement so that Lantern could use the confidential information to become the stalking horse bidder in the bankruptcy,” according to the jury trial seeking suit submitted Monday in L.A. Superior Court contends. (read it here)
A spokesperson for Lantern told Deadline that they are not going to comment on litigation.
In the 12-page complaint, Yucaipa details that it was approached by Lantern last November, to become part of the TWC acquisition. The parties seemingly agreed that they would form a new studio from the embattled company’s assets, with Lantern investing $50 million and Yucaipa contributing its existing financial interest in the company, valued at $20 million.
Under this agreement, Yucaipa would lead negotiations with The Weinstein Company, taking advantage of its established business relationship which included financing a dozen major films. Yucaipa would also raise the additional financing needed to complete the transaction.
In exchange for these services, Yucaipa stood to collect a fee of around $8 million.
The deal never materialized. But over the course of negotiations, Yucaipa said it collected an enormous amount of information about the studio’s assets, which it shared with Lantern.
As the Weinstein Co.’s financial situation grew more precarious, Yucaipa and Lantern realized bankruptcy would be unavoidable.
“Yucaipa and Lantern knew that, because of Yucaipa’s extensive due diligence related to TWC, no other investor would likely be able to ‘get up to speed’ in the short period of time to be the ‘stalking horse bidder’ in the TWC bankruptcy,” according to the suit.
The two firms entered into a new agreement in which Lantern would be permitted to use the extensive due diligence work done by Yucaipa as the basis for its own stalking-horse bid. If successful, Lantern promised to pay Yucaipa a 2% transaction fee and reimburse the company for the costs and expenses incurred.
“Lantern’s principals acknowledged (including in at least one press release) that without the head start afforded to Lantern by receiving confidential information from Yucaipa, Lantern would not have been able to be in a position to become the stalking horse,” the suit contends.
During recent meetings with Lantern, Yucaipa contends that the Dallas firm’s executives said they would no longer honor the agreement — giving rise to the civil suit. The law firm of Loeb & Loeb represents Yucaipa.
The Yucaipa suit was filed as Lantern closed its $289 million acquisition of The Weinstein Co., marking a fresh start to an entertainment company formed from the financial rubble of Harvey Weinstein’s alleged sexual misconduct.
Another party to that earlier bid for The Weinstein Co., Marvin Peart, brought suit last month, alleging Lantern cut him out of a deal he helped orchestrate and claiming racial motivations behind a willingness to cast him aside.
Deadline’s Anita Busch contributed to this story