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GOOGLE INC (GOOGL)

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Google Inc : Google to Settle Non-Voting Stock Shareholder Suit

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06/17/2013 | 04:36pm CEST

Google Inc. (GOOG) said its board has approved the terms of a proposed settlement with shareholders who have sued the search-giant in a bid to block its plan to issue a new type of stock that carries no voting rights.

In April of last year, Brockton Retirement Board sued Google following its announcement that it would split its stock to grant a new share to existing stockholders via a tax-free dividend. The company would pay stockholders a dividend of one Class C share for every Class A share they own.

Google could use these Class C shares to pay for acquisitions or to pay staff, which could dilute shareholder ownership. However these shares would have no voting power--a move that would benefit stockholders financially while keeping Chief Executive Larry Page, co-founder Sergey Brin and Executive Chairman Eric Schmidt securely in charge. The structure could make it harder for shareholders to challenge Messrs. Page, Brin and Schmidt, as activists have done at other tech companies.

The suit claims the stock unfairly benefits Messrs. Brin and Page.

In a Monday filing with the U.S. Securities and Exchange Commission, Google's memorandum of understanding laid out a series of steps it agreed to take to settle with shareholders.

For example, if Google considers using more than 10 million shares of Class C stock to pay for an acquisition, its independent board members will consider how using these will affect Class A shareholders and the company.

The agreement also proposes that when the aggregate voting control of Messrs. Page and Brin falls below 15%, the board will convert Class C shares to Class A shares if it decides it isn't in Google's best interests to maintain a class of nonvoting stock.

Google also unveiled measures to tie the trading price of Class C shares to those of Class A shares, and said if the former are trading at a discount to the latter, it could pay Class C shareholders the difference.

The search giant said it is open to paying attorneys' fees and the reimbursement of expenses and that if the settlement is approved, it will negotiate on this matter. The settlement is subject to approval by the Delaware Court of Chancery.

Class A shares were up $4.88 to $879.76 in recent trading. The stock has risen 56% in the past 12 months.

Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com

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Financials ($)
Sales 2016 88 490 M
EBIT 2016 29 460 M
Net income 2016 24 492 M
Finance 2016 49 249 M
Yield 2016 -
P/E ratio 2016 29,18
P/E ratio 2017 24,62
EV / Sales 2016 5,62x
EV / Sales 2017 4,75x
Capitalization 546 940 M
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Mean consensus OUTPERFORM
Number of Analysts 48
Average target price 938 $
Spread / Average Target 16%
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Managers
NameTitle
Lawrence E. Page Chief Executive Officer & Director
Sergey Mikhaylovich Brin President & Director
Eric E. Schmidt Executive Chairman
Ruth Porat Chief Financial Officer & Senior Vice President
Louis John Doerr Independent Director
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