PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT NOT TO BE DISCLOSED WITHOUT PRIOR AUTHORIZATION OF CALDERWOOD & HARKNESS LLP
CALDERWOOD & HARKNESS LLP 787 Seventh Avenue New York, NY 10019
MEMORANDUM
April 24, 2024
TO: Board of Directors, Aurelius Global Media Group PLC
ATTENTION: Dame Elspeth Greenvale, Independent Non-Executive Chair; Members of the Special Committee (Tobias Kessler, Chair; Lucinda Farrow-Grant; Dr. Anwen Llewellyn)
FROM: Calderwood & Harkness LLP
RE: Legal Framework for Evaluating Strategic Alternatives — Fiduciary Duties and Process Requirements
MATTER NO.: 1017-00002
AUTHORS: Nathaniel Bower, Responsible Partner; Colette Whitman, Partner; Audrey Zhou, Associate; Brendan Walsh, Associate
PRIVILEGE NOTICE: This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product prepared in anticipation of litigation and in connection with the provision of legal advice. This memorandum is protected from disclosure by the attorney-client privilege, the work product doctrine, and all other applicable privileges and protections. This memorandum is intended solely for the use of the Board of Directors of Aurelius Global Media Group PLC and its authorized advisors. No portion of this memorandum may be disclosed, reproduced, or distributed to any third party without the prior written authorization of Calderwood & Harkness LLP. Any inadvertent disclosure does not constitute a waiver of any privilege or protection.
I. EXECUTIVE SUMMARY
This memorandum provides the Board of Directors of Aurelius Global Media Group PLC ("AGMG" or the "Company") with a comprehensive legal framework for evaluating strategic alternatives following the Board's April 22, 2024 engagement of Stonebridge Crane & Co. ("Stonebridge") as financial advisor to the Board. The purpose of this memorandum is to ensure that the Board and the Special Committee are fully apprised of the fiduciary duties, process requirements, and governance considerations that will govern the strategic alternatives review from its inception through any potential transaction or, alternatively, through a determination to maintain the Company's current course as an independent enterprise.
The Board authorized the strategic alternatives review in the context of an ongoing and intensifying proxy contest initiated by Corvus Peak Capital Partners LP ("Corvus Peak"), which currently holds approximately 8.7% of AGMG's outstanding common shares — approximately 35,896,200 of the 412,600,000 shares of common stock outstanding as of the most recent record date. Corvus Peak has publicly advocated for, among other things, a strategic review of the Company's operations and portfolio, the appointment of new independent directors, and a formal succession plan for the chief executive officer position. The Board's decision to retain Stonebridge and to explore strategic alternatives may serve as a partial response to these demands, but it must be grounded in the Board's independent business judgment regarding what course of action will best serve the interests of AGMG and its shareholders.
The scope of this memorandum encompasses the following subjects:
(i) the fiduciary duties applicable to the Board's consideration of, and potential pursuit of, a sale or other strategic transaction under Delaware law, including the business judgment rule, the enhanced scrutiny frameworks of Unocal and Revlon, and the Blasius standard as it relates to the concurrent proxy contest;
(ii) the process requirements for a defensible exploration of strategic alternatives, including the respective roles of the full Board and the Special Committee, information-gathering and due diligence protocols, market check obligations, and documentation standards;
(iii) the interaction between the strategic alternatives review and the concurrent CEO succession process, including the critical importance of maintaining process separation and appropriate information barriers between these two workstreams;
(iv) specific governance considerations arising from AGMG's dual-listed status — with shares traded on both the New York Stock Exchange (NYSE ticker: AGMG) and the London Stock Exchange (LSE ticker: AGMG.L) — and the Company's incorporation under the Delaware General Corporation Law ("DGCL"); and
(v) practical considerations relating to the engagement of Stonebridge Crane, the Company's directors' and officers' insurance coverage, shareholder communication, and recommended next steps.
Key Takeaway. The Board must structure the strategic alternatives process to ensure compliance with Delaware fiduciary standards at every stage — from the initial exploratory phase through any potential transaction, negotiation, shareholder vote, and closing. The applicable standard of judicial review may shift depending on decisions the Board makes during the process: the protective business judgment rule governs the initial exploration; enhanced scrutiny under Unocal applies to any defensive measures; and heightened Revlon duties attach if and when the Board determines to sell the Company or to effect a change-of-control transaction. The Board's awareness of these shifting standards, and its deliberate structuring of the process to satisfy the requirements of each, is essential to both sound governance and litigation defensibility.
For context, AGMG's current financial profile is as follows: the Company's market capitalization was approximately £6.82 billion (approximately $8.65 billion at a conversion rate of $1.2683 per pound sterling) as of March 1, 2024. For fiscal year 2023, AGMG reported total revenue of $4.37 billion and EBITDA of $812 million, representing an EBITDA margin of 18.6%. The Company employs approximately 23,400 people worldwide. AGMG operates through four business segments: Streaming & Digital Content (42% of revenue), Live Entertainment & Events (24%), E-Commerce & Merchandising (19%), and Advertising & Brand Partnerships (15%). These financial parameters are relevant to the Board's evaluation of standalone value, potential transaction premiums, and the financial advisor engagement terms discussed in this memorandum.
II. BACKGROUND AND PROCEDURAL CONTEXT
A. Genesis of the Strategic Alternatives Review
The current strategic alternatives process is the product of a sequence of events that began in January 2024, when Corvus Peak first disclosed its position in AGMG. The following timeline sets forth the key events leading to the Board's April 22, 2024 decision to engage Stonebridge and commence a formal evaluation of strategic alternatives:
January 18, 2024. Corvus Peak Capital Partners LP filed its initial Schedule 13D with the Securities and Exchange Commission, disclosing the acquisition of beneficial ownership of approximately 6.1% of AGMG's outstanding common shares. The filing identified Damien Solberg as Corvus Peak's Founding Partner and Chief Investment Officer and indicated that the shares had been acquired for investment purposes, with Corvus Peak reserving the right to engage in discussions with the Company's management and Board regarding business strategy, capital allocation, and corporate governance matters.
February 12, 2024. Corvus Peak delivered a formal demand letter to the Board of Directors, addressed to Dame Elspeth Greenvale in her capacity as Independent Non-Executive Chair. The demand letter set forth three principal requests: (i) the appointment of two new independent directors acceptable to Corvus Peak, (ii) the initiation of a comprehensive strategic review of AGMG's business portfolio and capital allocation strategy, and (iii) the establishment of a formal and transparent process for the selection of a permanent chief executive officer. The letter cited what Corvus Peak characterized as persistent underperformance relative to media-sector peers, margin compression in the Live Entertainment & Events segment, and a lack of strategic clarity under the then-current management team.
February 26, 2024. Corvus Peak filed an amended Schedule 13D (Amendment No. 1), disclosing that it had increased its stake to approximately 8.7% of AGMG's outstanding common shares — approximately 35,896,200 shares. The amended filing also disclosed Corvus Peak's intent to nominate three candidates for election to the Board at the 2024 Annual General Meeting of Shareholders and stated that Corvus Peak would be filing a preliminary proxy statement in support of its nominees.
March 1, 2024. Corvus Peak submitted formal director nominations to the Company's Corporate Secretary, Nadine Khalil, in accordance with the advance notice provisions set forth in Section 2.10 of the Company's Amended and Restated Bylaws. The three nominees were: Malcolm Trask, a former chief operating officer of Centennial Media Holdings Inc.; Vanessa Loring, a former managing director at Whitfield Bancroft & Co. with extensive media-sector M&A experience; and Dr. Raymond Chu, a professor of digital media and technology strategy at the Stanford Graduate School of Business and a former board member of two publicly traded media companies.
March 8, 2024. Marcus Vane resigned as Chief Executive Officer of AGMG, effective immediately. Mr. Vane's departure was announced in an 8-K filed with the SEC and a corresponding RNS announcement on the London Stock Exchange. The Board designated Priya Nair-Whitfield, the Company's Chief Operating Officer, as Interim Chief Executive Officer, effective upon Mr. Vane's departure. The circumstances of Mr. Vane's resignation, including the terms of his separation, are addressed in a separate memorandum from Ashworth Velmoran LLP dated March 11, 2024.
March 12, 2024. Calderwood & Harkness LLP was engaged as independent governance counsel to the Board of Directors. The engagement was authorized by Dame Greenvale in her capacity as Chair, with the concurrence of the full Board, and was formalized in an engagement letter executed on March 13, 2024. The initial scope of the engagement encompassed advice on the Corvus Peak proxy contest, the CEO succession process, and general corporate governance matters.
March 15, 2024. Hargrove Tate Partners LLC ("Hargrove Tate"), led by Christine Aldridge as Lead Partner, was retained as the executive search firm to conduct the CEO succession process.
March 18, 2024. The Board formed a Special Committee of the Board of Directors, comprised of three independent directors: Tobias Kessler (Chair), Lucinda Farrow-Grant, and Dr. Anwen Llewellyn. The Special Committee was charged with overseeing the CEO succession process and coordinating the Board's response to the Corvus Peak activist campaign. The Special Committee was authorized to retain its own advisors and to make recommendations to the full Board, but was not delegated authority to take final action on either the CEO appointment or any settlement with Corvus Peak.
April 1, 2024. Corvus Peak filed its preliminary proxy statement with the SEC in support of the election of its three nominees at the 2024 Annual General Meeting. The proxy statement reiterated Corvus Peak's criticisms of the Board's management oversight, capital allocation, and governance practices, and argued that the election of Trask, Loring, and Chu was necessary to ensure that AGMG pursued a value-maximizing strategy.
April 5, 2024. AGMG filed its preliminary proxy statement with the SEC in opposition to the Corvus Peak slate, recommending the election of the Company's incumbent director nominees.
April 22, 2024. Following a telephonic meeting of the full Board of Directors at which Calderwood & Harkness and Stonebridge each presented, the Board authorized the engagement of Stonebridge Crane & Co. as financial advisor to the Board to evaluate strategic alternatives. The engagement terms, as reflected in the engagement letter executed on April 22, 2024, provide for a monthly retainer of $250,000 payable to Stonebridge, plus a transaction fee of 0.25% of enterprise value if a change-of-control transaction is consummated. The Board's decision to explore strategic alternatives was predicated on the Board's independent determination that such an exploration was advisable in light of both the activist pressure and the Board's own assessment of AGMG's current operating environment and market positioning.
B. Relevant Corporate Governance Framework
AGMG is incorporated in the State of Delaware. The Company's Certificate of Incorporation was originally filed with the Delaware Secretary of State on September 14, 2009, and was last amended and restated on March 22, 2022. In addition to its Delaware incorporation, AGMG is registered as an overseas company in England and Wales pursuant to Part 34 of the UK Companies Act 2006.
The Company's registered agent in Delaware is Pinnacle Corporate Services Inc., located at 1209 Orange Street, Wilmington, Delaware 19801. The Company's Amended and Restated Bylaws (the "Bylaws") became effective on March 22, 2022 and govern the internal affairs of the Company, subject to and in accordance with the DGCL and the Certificate of Incorporation.
The following governance features are relevant to the strategic alternatives analysis:
Declassified Board. The Board is declassified, with all directors standing for election annually. The declassification was approved by shareholders in 2021 and became fully effective for the 2023 annual meeting cycle. The absence of a classified board structure means that Corvus Peak has the ability to seek to replace the entire Board in a single election cycle, which increases the urgency of the Board's response to the proxy contest.
No Shareholder Rights Plan (Poison Pill). The Board does not currently have a shareholder rights plan in effect. On April 10, 2024, following a thorough analysis by Calderwood & Harkness set forth in our April 8, 2024 memorandum (which applied the Moran v. Household International, Inc. framework and considered the current activist landscape), the Board declined to adopt a poison pill. The absence of a rights plan is a relevant consideration in evaluating the Company's vulnerability to an unsolicited takeover bid and the Board's available defensive tools.
Exclusive Forum Provision. Section 11.1 of the Bylaws designates the Court of Chancery of the State of Delaware as the exclusive forum for the adjudication of intra-corporate disputes, including claims arising under the DGCL and claims of breach of fiduciary duty. This provision provides the Company with a significant procedural advantage in any fiduciary duty litigation arising from the strategic alternatives process, as the Court of Chancery is the preeminent forum for Delaware corporate law disputes.
Governing Law. Pursuant to the internal affairs doctrine, the fiduciary duties of AGMG's directors and the standards of judicial review applicable to their conduct are governed by the DGCL and the case law of the Delaware courts.
C. Advisors Involved in the Strategic Alternatives Process
The following advisors are currently engaged or available in connection with the strategic alternatives review and related Board processes. It is critical that the Board understand the respective roles and potential conflicts of each advisor and that appropriate coordination protocols are maintained among them.
Calderwood & Harkness LLP serves as independent board governance counsel to the Board of Directors. The firm was initially engaged on March 12, 2024 to advise on the proxy contest and CEO succession process. On April 22, 2024, the engagement was expanded pursuant to an amended engagement letter to include strategic alternatives coordination, including advice on fiduciary duty compliance, process design, transaction structuring, and related governance matters. Nathaniel Bower serves as the Responsible Partner, with Colette Whitman as the co-lead Partner on the engagement.
Stonebridge Crane & Co. serves as financial advisor to the Board. Stonebridge was engaged on April 22, 2024, with Anil Kapoor-Mehta, Managing Director, serving as the lead banker. Stonebridge's scope of work encompasses standalone valuation analysis, identification and evaluation of potential strategic counterparties, and — if directed by the Board — management of an outreach process and facilitation of negotiations. The terms of Stonebridge's engagement are discussed in detail in Section VIII of this memorandum.
Ashworth Velmoran LLP serves as standing outside counsel to AGMG management, with Martin Cho as the Lead Partner on the engagement. Ashworth Velmoran is available for transactional execution in connection with any strategic alternative that the Board determines to pursue, subject to the coordination protocol established on March 19, 2024. That protocol provides that Calderwood & Harkness will serve as lead counsel on all Board-level governance matters, with Ashworth Velmoran serving as lead counsel on day-to-day corporate and transactional matters at the direction of management, subject to Board oversight through Calderwood & Harkness.
Hargrove Tate Partners LLC serves as the executive search firm retained on March 15, 2024 to conduct the CEO succession process, with Christine Aldridge as Lead Partner. The CEO search process must be coordinated with but kept independent from the strategic alternatives review, for reasons discussed in Section V of this memorandum.
Brackenridge Howard Associates Inc. serves as the Board's independent compensation consultant, with Miriam Estabrook as the Lead Consultant. Brackenridge Howard is advising on CEO compensation benchmarking in connection with the CEO succession process and may be called upon to advise on compensation-related matters in connection with a potential strategic transaction, including change-of-control provisions in executive employment agreements and potential management incentive arrangements.
Glenmore & Partners LLP serves as AGMG's independent auditor, with Keith Redmond as Engagement Partner. Glenmore has served as AGMG's auditor since 2019 and will be relevant to the strategic alternatives process in connection with due diligence access, comfort letters, and verification of financial data underlying any valuation analysis.
D. Current Board Composition and Factional Dynamics
An understanding of the current Board composition and the factional dynamics within the Board is essential to the design and management of the strategic alternatives process. The Board currently has nine seated voting members, with one vacancy following Marcus Vane's resignation as CEO on March 8, 2024. The seated directors are as follows:
Nadine Khalil serves as General Counsel and Corporate Secretary and attends Board meetings in an advisory capacity but is a non-voting participant.
Management and Board insiders collectively hold approximately 3.2% of the outstanding common shares, representing approximately 13,203,200 shares. Of this total, Hugh Pemberton's personal stake accounts for 2.1%, or approximately 8,664,600 shares.
Calderwood & Harkness has observed that the Board is currently divided into identifiable factions with respect to the CEO succession process, which may also affect alignment on strategic alternatives:
•  Faction supporting Priya Nair-Whitfield as permanent CEO: Dame Elspeth Greenvale, Lucinda Farrow-Grant, Hugh Pemberton, and Sofia Delgado-Ríos (four directors).
•  Faction supporting external candidate Jonathan Hale: Tobias Kessler, Reginald Osei, and Dr. Anwen Llewellyn (three directors).
•  Neutral: Garrett Voss (one director), who has expressed a preference for deferring to the Special Committee's recommendation.
This factional split is relevant to the strategic alternatives review because the two CEO candidates may be associated with different strategic visions for the Company. Ms. Nair-Whitfield has publicly emphasized AGMG's standalone growth potential and the execution of a multi-year digital transformation strategy. Mr. Hale, by contrast, has been associated — including through his relationship with Corvus Peak's Damien Solberg and their shared board service at Keystone Digital Ventures Ltd. — with a more aggressive portfolio rationalization approach that could include the divestiture of one or more business segments. The Board must be conscious that these factional dynamics do not distort the strategic alternatives evaluation, and must act collectively in the discharge of its fiduciary duties regardless of individual directors' views on the CEO succession.
III. APPLICABLE FIDUCIARY DUTY FRAMEWORK UNDER DELAWARE LAW
The Delaware courts have developed a well-established and nuanced body of law governing the fiduciary duties of corporate directors in the context of strategic alternatives reviews and potential change-of-control transactions. This Section sets forth the applicable legal standards in the order in which they are most likely to arise during the course of AGMG's strategic alternatives process.
A. The Business Judgment Rule — Default Standard
Under Delaware law, the decisions of a corporation's board of directors are entitled to a presumption that they were the product of an informed process, undertaken in good faith, and in the honest belief that the action taken was in the best interests of the corporation and its stockholders. This presumption — known as the business judgment rule — is the default standard of judicial review in Delaware and operates as a powerful shield for directors whose conduct is challenged in litigation. See Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984); In re Walt Disney Co. Derivative Litigation, 906 A.2d 27, 52 (Del. 2006).
The business judgment rule reflects a foundational principle of Delaware corporate law: that courts will not second-guess the substantive business decisions of disinterested and informed directors, even if those decisions turn out to be wrong. The rule recognizes that business decisions inherently involve risk and uncertainty, and that directors — not judges — are best positioned to evaluate the complex strategic, operational, and financial considerations that inform corporate decision-making.
To invoke the protection of the business judgment rule, a board must satisfy four requirements:
(i) Procedural Due Care. The directors must inform themselves of all material information reasonably available to them before making a decision. This requires that the Board obtain and review relevant financial analyses, market data, legal advice, and other pertinent information. See Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985).
(ii) Substantive Due Care. The decision itself must have a rational business purpose. A decision that cannot be attributed to any rational business purpose is said to constitute "waste" and will not be protected by the business judgment rule. See Brehm v. Eisner, 746 A.2d 244, 264 (Del. 2000).
(iii) Good Faith. The directors must act in subjective good faith — that is, with an honest belief that their actions serve the best interests of the corporation and its stockholders. A conscious disregard of one's duties, or a decision motivated by bad faith, vitiates the business judgment presumption. See In re Walt Disney Co. Derivative Litigation, 906 A.2d at 67.
(iv) Absence of Conflicts of Interest. The decision must be made by directors who are disinterested and independent with respect to the matter at hand. A director who has a personal financial interest in the outcome of a decision, or who is beholden to a person with such an interest, is not disinterested and may not invoke the business judgment presumption. See Rales v. Blasband, 634 A.2d 927, 936 (Del. 1993).
Application to the Current Situation. The Board's decision to engage Stonebridge and to explore strategic alternatives is itself a business decision that is protected by the business judgment rule, so long as the decision was informed, made in good faith, and not motivated by impermissible considerations such as personal entrenchment. The Board's stated rationale — responding to Corvus Peak's demands and evaluating whether value-maximizing alternatives to the Company's current standalone plan exist — satisfies this standard. The Board should, however, be prepared to demonstrate that its decision was informed by an analysis of the Company's current performance, market conditions, and the range of strategic options potentially available, and was not undertaken solely or primarily for the purpose of defending against the proxy contest.
Importantly, the business judgment rule governs the Board's conduct during the exploratory phase of the strategic alternatives process. So long as the Board has not committed to a sale or change-of-control transaction, the Board retains the full protection of the business judgment rule in deciding how to structure the process, what alternatives to consider, and whether ultimately to pursue any transaction at all or to reaffirm the Company's standalone strategy.
B. Enhanced Scrutiny Under *Unocal/Unitrin*
Because the strategic alternatives review was initiated in part as a defensive response to Corvus Peak's proxy contest, any specific defensive measures adopted by the Board in connection with the review — or any aspect of the strategic alternatives process that serves a defensive function — will be subject to enhanced scrutiny under Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), and its progeny, including Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995).
The Unocal framework applies when a board of directors takes action in the face of a perceived threat to the corporation — such as a hostile takeover bid, a proxy contest, or other activist campaign — and is designed to ensure that defensive actions are proportionate and not motivated by the directors' desire to entrench themselves in office. Unlike the business judgment rule, which places the burden of proof on the plaintiff challenging the board's action, the Unocal framework imposes an initial burden on the board to demonstrate the reasonableness of its conduct.
The Unocal test proceeds in two parts:
(1) Threat Identification. The board must demonstrate that it had reasonable grounds for believing that a danger to corporate policy and effectiveness existed. This prong is satisfied through a showing that the board acted in good faith and after a reasonable investigation. The board need not demonstrate that the perceived threat was, in fact, harmful — only that the board's belief in the existence of the threat was reasonable. The nature of the threat — whether it involves inadequate price, coercive tactics, substantive concerns about the activist's proposed strategy, or some other danger — is relevant to the proportionality analysis in the second prong.
(2) Proportionality of Response. The board must demonstrate that the defensive measure adopted was reasonable in relation to the threat posed. Under the Unitrin refinement, a defensive measure is disproportionate and therefore unreasonable if it is either coercive (i.e., it forces stockholders to accept a particular outcome against their will) or preclusive (i.e., it makes a successful challenge by the activist mathematically impossible or realistically unattainable). If the defensive measure is neither coercive nor preclusive, it is reviewed for reasonableness within a range of reasonable responses available to the board.
Application to the Current Situation. The Unocal framework is relevant to the strategic alternatives review in several specific respects. First, the announcement and pursuit of strategic alternatives can itself serve as a defensive measure, insofar as it signals to shareholders that the Board is proactively evaluating value-maximizing options and thereby undercuts Corvus Peak's narrative that the Board is entrenched and resistant to change. If a court were to determine that the primary purpose of the strategic alternatives review was defensive — that is, that the Board initiated the review to blunt Corvus Peak's proxy campaign rather than to genuinely evaluate strategic options — the process would be scrutinized under Unocal. The Board must therefore ensure that the strategic alternatives exploration is driven by genuine business considerations and is not merely a tactical device.
Second, if the Board were to enter into a strategic transaction that has the effect of defeating or mooting the proxy contest — for example, by consummating a sale of the Company before the June 7, 2024 Annual General Meeting, or by entering into a merger agreement that includes voting or support agreements with sufficient shareholders to guarantee approval — such a transaction would be evaluated under Unocal for its defensive character, in addition to any applicable Revlon analysis.
Third, any specific defensive measures that the Board may adopt in connection with the strategic alternatives review — such as the adoption of a standstill provision in a settlement agreement with Corvus Peak, or the granting of lock-up provisions to a favored bidder — would independently be subject to Unocal scrutiny.
We refer the Board to Calderwood & Harkness's April 12, 2024 memorandum on defensive measures and our April 8, 2024 memorandum analyzing the advisability of adopting a shareholder rights plan under the Moran v. Household International, Inc., 500 A.2d 1346 (Del. 1985), framework for a more detailed discussion of specific defensive measures available to the Board.
C. *Revlon* Duties — When They Are Triggered
The most significant shift in the applicable legal standard occurs when Revlon duties are triggered. Under Revlon, Inc. v. MacAndrews & Forbaci Holdings, Inc., 506 A.2d 173 (Del. 1986), once the board of directors determines to sell the company or to effect a transaction that will result in a change of control, the board's fiduciary duty shifts from the preservation of the corporate enterprise as a going concern to the maximization of the company's value for the benefit of stockholders in the context of that sale. In the vernacular of Delaware corporate law, the directors' role transforms from that of "defenders of the corporate bastion" to "auctioneers charged with getting the best price for the stockholders at a sale of the company." Revlon, 506 A.2d at 182.
Revlon duties are triggered in one of three circumstances:
(i) The board initiates an active bidding process seeking to sell itself or to effect a business reorganization involving a clear break-up of the company.
(ii) In response to a bidder's offer, the board abandons its long-term strategy and seeks an alternative transaction also involving the break-up of the company.
(iii) The board approves a transaction resulting in a sale or change of control. A "change of control" occurs when control of the corporation passes from a fluid aggregation of unaffiliated public stockholders to a single controlling stockholder or cohesive group of stockholders. See Paramount Communications Inc. v. QVC Network Inc., 637 A.2d 34, 46-47 (Del. 1994).
Critical Distinction: Exploration vs. Commitment. A point of paramount importance for the Board to understand is that Revlon duties are not triggered merely by the Board's decision to explore strategic alternatives. The Delaware courts have consistently held that a board may explore potential transactions — including engaging a financial advisor, receiving and evaluating indications of interest, and conducting preliminary negotiations — without triggering Revlon duties. See In re Smurfit-Stone Container Corp. Shareholder Litigation, C.A. No. 6164-VCP (Del. Ch. May 20, 2011). Revlon duties attach only when the board makes a deliberate decision to pursue a sale or change-of-control transaction. This distinction is critical because it means that the Board retains the protective umbrella of the business judgment rule during the exploratory phase, and should be careful not to take actions or make statements that could be construed as a premature commitment to a sale.
Obligations Once *Revlon* Is Triggered. Once Revlon duties attach, the Board must act reasonably to seek the best price reasonably available for the stockholders. This does not mean that the Board must necessarily conduct a formal auction; the Delaware courts have recognized that there is "no single blueprint" for conducting a sale process and that the Board has flexibility to structure a process that is reasonable under the circumstances. See Barkan v. Amsted Industries, Inc., 567 A.2d 1279, 1286 (Del. 1989). However, the Board's actions and decisions during the sale process will be measured by the yardstick of reasonableness, and the Board must be able to demonstrate that its process was designed and executed in a manner calculated to achieve the best available price.
Under Revlon, the Board may consider factors beyond price — such as the certainty of closing, the form of consideration (cash vs. stock), regulatory risk, the impact on employees and other stakeholders, and the timing of the transaction — but only to the extent that such factors bear on the overall value being delivered to stockholders. The Board may not favor one bidder over another based on personal relationships, management retention arrangements, or other considerations that are unrelated to stockholder value.
The Board should also be aware that, under Revlon, certain deal protection measures — such as no-shop provisions, termination fees, and matching rights — are permissible so long as they are reasonable in scope and do not unduly restrict the Board's ability to entertain superior proposals. An excessively restrictive no-shop provision or an unreasonably large termination fee may be invalidated by the Court of Chancery as a breach of Revlon duties. See In re Topps Co. Shareholders Litigation, 926 A.2d 58 (Del. Ch. 2007).
D. Good Faith and the Duty of Loyalty
Throughout the strategic alternatives process — regardless of which standard of judicial review applies at any given stage — the directors of AGMG owe a duty of loyalty to the Company and its stockholders. The duty of loyalty is the most fundamental of the fiduciary obligations and requires that directors place the interests of the corporation and its stockholders above their own personal interests.
The duty of loyalty encompasses the obligation to act in good faith. Under the Delaware Supreme Court's decision in Stone v. Ritter, 911 A.2d 362, 370 (Del. 2006), good faith is a component of the duty of loyalty rather than a separate, independent fiduciary duty. A director fails to act in good faith if he or she (i) acts with a purpose other than advancing the best interests of the corporation, (ii) acts with the intent to violate applicable positive law, or (iii) consciously disregards his or her duties, thereby failing to act in the face of a known duty. See In re Walt Disney Co. Derivative Litigation, 906 A.2d at 67.
Application to the Current Situation. The duty of loyalty is of particular relevance here because the strategic alternatives review is proceeding against the backdrop of a proxy contest in which the composition of the Board itself is at stake. Each director's interest in maintaining his or her board seat creates an inherent tension: a director who supports a strategic transaction that has the effect of defeating the proxy contest — for example, by rendering the Annual General Meeting moot or by changing the composition of the shareholder base in a manner that favors the incumbent slate — may face allegations that the transaction was motivated by the desire to preserve the director's position rather than to maximize stockholder value.
Conversely, a director who opposes a value-maximizing transaction because it would result in the election of Corvus Peak's nominees (in a reconstituted post-closing board) or because it would diminish the director's personal influence within the Company would likewise be in breach of the duty of loyalty.
Any director with a personal conflict of interest with respect to a particular strategic alternative — including any director who may benefit from or be harmed by the consummation of a specific transaction — should consider recusing himself or herself from the relevant deliberations. The Board should identify potential conflicts at the outset of the process and establish protocols for managing them, including the potential formation of a separate transaction committee of unconflicted independent directors if a specific transaction raises conflict concerns for multiple Board members.
E. Intersection with *Blasius* Enhanced Scrutiny
A further layer of judicial scrutiny applies when a board takes action whose primary purpose is to impede the exercise of the stockholder franchise. Under Blasius Industries, Inc. v. Atlas Corp., 564 A.2d 651 (Del. Ch. 1988), board action taken for the primary purpose of impeding stockholders' ability to exercise their voting rights is subject to the most exacting form of judicial review: the board must demonstrate a "compelling justification" for its action. This is an extraordinarily difficult standard to satisfy, and Delaware courts have rarely found that a board's action survives Blasius review.
Application to the Current Situation. The intersection of the strategic alternatives process with the June 7, 2024 Annual General Meeting and the Corvus Peak proxy contest creates a significant Blasius risk. If the Board were to approve a strategic transaction whose timing or structure appeared designed to render the Annual General Meeting moot — for example, by signing a definitive merger agreement before the meeting and conditioning it on the continuation of the incumbent Board — or to dilute Corvus Peak's voting power by issuing shares to a strategic partner, the transaction could be challenged under Blasius as an impermissible interference with the stockholder franchise.
The Blasius risk is particularly acute in the present circumstances because Corvus Peak has publicly stated its intent to use the proxy contest as a vehicle for influencing AGMG's strategic direction. A court reviewing the Board's conduct would likely examine whether the timing and structure of any strategic transaction were motivated by a desire to foreclose Corvus Peak's ability to elect its nominees and thereby redirect AGMG's strategy.
Recommendation. The strategic alternatives timeline should proceed on its own merits and should not be artificially accelerated or structured to coincide with or preempt the proxy contest. Any transaction the Board determines to pursue must stand on independent business grounds — that is, it must be supportable by reference to its value-maximizing properties without regard to its impact on the proxy contest. If the Board determines that a particular transaction is in the best interests of stockholders, the Board should pursue it regardless of the proxy contest timeline; but the Board must be able to demonstrate that the transaction was not undertaken because of its impact on the proxy contest.
We refer the Board to our forthcoming April 28, 2024 proxy contest defense memorandum, and to the internal Blasius research memorandum being prepared pursuant to the April 25, 2024 research assignment, for a more detailed analysis of the Blasius framework and its application to specific transaction structures.
IV. PROCESS REQUIREMENTS FOR A DEFENSIBLE STRATEGIC ALTERNATIVES REVIEW
The legal framework set forth in Section III establishes the substantive standards by which the Board's conduct will be judged. This Section addresses the process requirements — the procedural steps the Board must take to ensure that its exploration of strategic alternatives satisfies those substantive standards and is defensible in the event of a litigation challenge.
A. Role of the Board vs. the Special Committee
The full Board of Directors authorized the engagement of Stonebridge Crane on April 22, 2024, and it is the full Board that bears ultimate fiduciary responsibility for the strategic alternatives process. A threshold question is whether the full Board should continue to oversee the strategic alternatives review or whether oversight should be delegated to the Special Committee (Kessler, Farrow-Grant, Llewellyn) or to a newly constituted committee.
There are arguments in favor of delegation to the Special Committee, including the efficiency of a smaller group, the ability to maintain tighter confidentiality, and the established working relationship among the Special Committee members. However, there are also significant countervailing considerations. First, the Special Committee was formed to oversee CEO succession and the response to the Corvus Peak campaign — not strategic alternatives. Broadening the Special Committee's mandate could conflate two processes that should be kept separate, increasing the risk that decisions on one workstream are influenced by considerations relevant to the other. Second, the full Board has a broader range of perspectives and expertise than the three-member Special Committee, which is particularly important for a decision as consequential as a potential sale of the Company. Third, delegating the strategic alternatives process to a committee whose Chair (Kessler) supports an external CEO candidate (Hale) who has ties to Corvus Peak could create the appearance — or reality — of a process that is aligned with the activist's agenda.
Recommendation. The full Board should maintain oversight of the strategic alternatives review, with Stonebridge reporting directly to the full Board at regular intervals. The Special Committee should continue to focus on CEO succession and should be kept informed of developments in the strategic alternatives process on a general basis, but should not direct or manage that process. If a specific transaction emerges that raises conflict-of-interest concerns for certain directors — for example, a transaction involving a counterparty with which a director has a personal or financial relationship, or a transaction that would disproportionately benefit a director's economic interests — the Board should at that time consider forming a separate transaction committee comprised exclusively of independent, unconflicted directors. Calderwood & Harkness will advise the Board on the appropriate composition and mandate of any such committee as circumstances warrant.
B. Information Gathering and Due Diligence
A defensible strategic alternatives process must be grounded in a thorough and rigorous information-gathering effort. The Board cannot make an informed decision about whether to pursue a strategic transaction — and, if so, which type of transaction is in the best interests of stockholders — without first developing a comprehensive understanding of AGMG's standalone value, the range of strategic alternatives potentially available, and the likely terms and conditions of each.
Standalone Valuation. As an initial step, Stonebridge Crane should be directed to prepare a comprehensive standalone valuation analysis of AGMG. This analysis should include, at a minimum:
•  A discounted cash flow ("DCF") analysis based on AGMG's management projections, with sensitivity analysis across a range of discount rates, terminal growth rates, and operating assumptions;
•  A comparable company analysis, benchmarking AGMG's valuation multiples (including EV/EBITDA, EV/Revenue, and P/E) against those of its publicly traded peers in the global media sector;
•  A precedent transaction analysis, examining the valuation multiples and premiums paid in recent acquisitions of comparable companies in the media, entertainment, and digital content sectors; and
•  A sum-of-the-parts analysis that values each of AGMG's four business segments independently and compares the aggregate implied value to AGMG's current trading value, in order to evaluate whether a conglomerate discount exists and, if so, the potential value creation from portfolio rationalization.
Management Projections. The financial projections underlying the standalone valuation are critical to the integrity of the process. These projections should be prepared or validated by AGMG management — specifically, by Garrett Voss in his capacity as Chief Financial Officer — and should be presented to and reviewed by the Board. The Board should engage substantively with the projections, questioning their key assumptions (including revenue growth rates, margin trajectories, capital expenditure requirements, and working capital needs) and satisfying itself that the projections represent management's good-faith assessment of the Company's future performance. The Board should request that Stonebridge present sensitivity analyses showing the impact of alternative assumptions on the standalone valuation.
Independent Auditor Engagement. Glenmore & Partners LLP (Keith Redmond, Engagement Partner), as AGMG's independent auditor, should be engaged to provide any necessary comfort on the historical financial data used in the valuation process. While the standalone valuation will rely primarily on forward-looking projections, the historical financial baseline — including FY 2023 revenue of $4.37 billion and EBITDA of $812 million — must be accurate and reliable.
Counterparty Landscape Survey. In addition to the standalone valuation, Stonebridge should prepare a preliminary survey of the landscape of potential strategic counterparties. This survey should identify potential acquirers (both strategic and financial), potential merger partners, and potential joint venture or strategic partnership counterparts, categorized by type, strategic rationale, estimated financial capacity, and likely level of interest. At this stage, the survey should be based on publicly available information and Stonebridge's institutional knowledge of the media sector. No formal outreach to any potential counterparty should be undertaken until expressly authorized by the Board.
Antitrust and Competition Analysis. Given AGMG's significant market position across multiple media segments — and, in particular, the Company's leading positions in the Streaming & Digital Content and Live Entertainment & Events segments — due diligence on any potential counterparty must include a preliminary antitrust and competition analysis. A transaction that combines AGMG with a competitor in any of its business segments could raise significant antitrust concerns under U.S. federal antitrust law (Hart-Scott-Rodino Act), European Union competition law (EU Merger Regulation), UK competition law (Enterprise Act 2002 and the jurisdiction of the Competition and Markets Authority), and potentially the competition laws of other jurisdictions in which AGMG operates. Calderwood & Harkness will coordinate with its antitrust practice group and, if necessary, with specialist antitrust counsel to provide the Board with a preliminary competition analysis with respect to any specific transaction the Board determines to explore.
C. Outreach and Market Check Protocols
One of the most significant process decisions the Board will face is whether and how to conduct a "market check" — that is, to solicit or invite expressions of interest from potential counterparties in order to determine whether a value-maximizing transaction is available. The contours of the Board's market check obligation depend on the applicable legal standard and the specific circumstances.
Passive Market Check. The Board's public disclosure that it is evaluating strategic alternatives — which may occur through press reporting, SEC filings, or other channels — may itself generate unsolicited expressions of interest from potential counterparties. A "passive" market check, in which the Board receives and evaluates inbound inquiries without actively soliciting bids, can provide the Board with valuable market intelligence regarding the level and nature of potential buyer interest. The Board should establish a protocol for receiving, logging, and evaluating inbound inquiries, including the designation of a single point of contact (which we recommend be Anil Kapoor-Mehta at Stonebridge, with prompt reporting to Calderwood & Harkness and Dame Greenvale) and the preparation of a standard non-disclosure agreement ("NDA") template for execution by any party requesting access to non-public information.
Active Market Check. If the Board determines that a passive market check is insufficient to provide the information necessary for an informed decision — or if the Board decides to move toward a transaction and wishes to maximize competitive tension — the Board may direct Stonebridge to conduct an active market check. In an active market check, Stonebridge would prepare a list of potential counterparties, develop a "teaser" document (a brief, anonymized or partially anonymized description of the opportunity) and NDA framework, and conduct controlled outreach to selected parties under strict confidentiality. Any counterparty expressing interest and executing an NDA would then receive a confidential information memorandum and be invited to submit an indication of interest within a specified time frame.
Legal Standard. Under Delaware law, the Board is not required to conduct any specific form of market check in order to satisfy its fiduciary duties. See Barkan v. Amsted Industries, Inc., 567 A.2d at 1286. The adequacy of the market check — or the decision not to conduct one — will be evaluated in the context of all the circumstances, including the Board's knowledge of the Company's value, the level of market awareness of the opportunity, and the reasonableness of the Board's decision-making process. A passive market check may be adequate if the Board has sufficient information — through the standalone valuation, Stonebridge's market intelligence, and any inbound inquiries — to make an informed judgment. Conversely, if the Board receives a single bid and determines to accept it without canvassing the market, the Board's ability to demonstrate the fairness of the price may be limited, which increases litigation risk.
Evaluation of Unsolicited Bids. If the Board receives an unsolicited bid for the Company or any of its business segments, the Board is obligated to evaluate the bid in good faith and with appropriate deliberation. The Board may not simply ignore or reject a credible unsolicited offer without analysis, particularly if the offer appears to represent a significant premium to the Company's standalone value. The Board's response to an unsolicited bid — including the decision of whether to engage with the bidder, to seek competing bids, or to reject the offer — will be evaluated for reasonableness in the event of a subsequent litigation challenge.
Confidentiality. All strategic alternatives discussions and materials should be maintained under the strictest confidentiality. Premature disclosure of the Board's consideration of specific transactions, potential counterparties, or indicative pricing could have significant adverse consequences, including destabilizing the Company's workforce and business relationships, distorting the Company's stock price, impairing the Board's negotiating position, and creating potential liability under the securities laws. The Board should establish robust NDA protocols before any information is shared with potential counterparties, and all internal communications regarding strategic alternatives should be clearly marked as privileged and confidential. We refer the Board to our April 26, 2024 memorandum on confidentiality and information barrier protocols for a detailed set of recommendations.
D. Board Deliberation and Documentation Standards
The quality and thoroughness of the Board's deliberative process — and, critically, the contemporaneous documentation of that process — are essential to the defensibility of the strategic alternatives review in the event of a litigation challenge. The Delaware courts have repeatedly emphasized the importance of a well-documented decision-making process, and have drawn adverse inferences from the absence of contemporaneous records.
Meeting Formalities. All Board and committee meetings at which strategic alternatives are discussed should be formally noticed in accordance with the Bylaws, with attendance recorded and detailed minutes taken by the Corporate Secretary (Nadine Khalil) or her designee. Calderwood & Harkness recommends that Ms. Khalil or a member of the Calderwood & Harkness team take notes during all strategic alternatives discussions to supplement the formal minutes.
Advance Distribution of Materials. Directors should receive materials relating to strategic alternatives discussions — including financial analyses, valuation summaries, advisor presentations, and legal memoranda — sufficiently in advance of each meeting to permit meaningful review and preparation. As a general matter, materials should be distributed at least 48 hours prior to the meeting, and longer in advance for particularly complex or voluminous materials. Directors should be encouraged to submit questions in advance of the meeting to ensure that discussions are productive and efficient.
Substantive Engagement. The Board must demonstrate that it engaged substantively with the information and advice provided by its financial and legal advisors. Passive receipt of advisor presentations, without questioning, discussion, or deliberation, will not satisfy the Board's duty of care. The minutes should reflect that directors asked questions, raised concerns, tested assumptions, and debated alternatives. Where the Board disagrees with an advisor's recommendation or analysis, the basis for the disagreement should be documented.
Financial Advisor Presentations. All presentations by Stonebridge Crane — including preliminary valuation analyses, counterparty landscape surveys, and any fairness opinion — should be memorialized in writing and either attached to or summarized in the Board minutes. The Board should request written copies of all materials presented by Stonebridge and should retain those materials in the Board's files.
Fairness Opinion Process. If the Board ultimately determines to pursue a specific transaction, it should obtain a fairness opinion from Stonebridge (or, if Stonebridge has conflicts that could undermine the opinion's evidentiary value, from an independent financial advisor). The fairness opinion process should not be perfunctory. The Board should engage substantively with Stonebridge's fairness analysis, including reviewing and questioning the financial assumptions, valuation methodologies, and comparable transactions used. The Board should satisfy itself that the opinion's conclusions are reasonable and supported by the underlying analysis.
Evidentiary Foundation. The documentation produced during the strategic alternatives process — including Board and committee minutes, advisor presentations, legal memoranda, email correspondence, and other records — will constitute the evidentiary foundation in any subsequent litigation challenging the Board's decisions. It is not an overstatement to say that the outcome of any such litigation will depend in significant part on the quality and completeness of the contemporaneous record. The Board should approach each meeting and each decision with the awareness that its deliberations may be scrutinized by a court, and should ensure that the record reflects a thorough, informed, and good-faith process.
E. Transaction Structure Considerations
The range of potential strategic alternatives available to AGMG is broad, and each type of transaction carries different fiduciary implications, tax consequences, regulatory requirements, and risk profiles. While a comprehensive analysis of specific transaction structures is beyond the scope of this memorandum and will depend on the results of Stonebridge's valuation and counterparty analyses, the following summary provides a preliminary framework for the Board's consideration.
Whole-Company Sale (Change of Control). A sale of the entire Company — whether structured as a merger, tender offer, or other business combination — would constitute a change-of-control transaction triggering full Revlon duties. The Board would be required to seek the best price reasonably available for stockholders and to structure the sale process in a manner calculated to achieve that objective. The Board would need to decide whether to conduct a formal auction (soliciting bids from multiple potential acquirers on a competitive basis), a targeted sale process (approaching a limited number of the most likely and most qualified potential acquirers), or a negotiated sale (engaging with a single bidder, potentially following a passive market check). Each approach has advantages and risks, and the appropriate process will depend on the circumstances, including the level and nature of buyer interest, the competitive dynamics among potential bidders, and the Board's assessment of the Company's value.
Asset Sale / Segment Divestiture. A sale of one or more of AGMG's business segments — such as the divestiture of the E-Commerce & Merchandising segment ($830.3 million in FY 2023 revenue) or the Advertising & Brand Partnerships segment ($655.5 million in FY 2023 revenue) — would not necessarily trigger Revlon duties, provided that the transaction does not result in a change of control of the Company as a whole. A segment divestiture would generally be reviewed under the business judgment rule, although the Board would still be required to demonstrate that the decision was informed and made in good faith. If the divestiture involves the sale of "substantially all" of AGMG's assets, stockholder approval would be required under DGCL § 271. The determination of whether a particular divestiture constitutes the sale of "substantially all" assets is a fact-specific inquiry that depends on both quantitative and qualitative factors.
Stock-for-Stock Merger with No Change of Control. A stock-for-stock merger in which the post-merger entity is owned by a dispersed group of public stockholders (i.e., no single stockholder or cohesive group acquires control) may not trigger Revlon duties. Under Paramount Communications Inc. v. Time Inc., 571 A.2d 1140 (Del. 1989), and its progeny, Revlon applies only when there is a change of control — that is, when control of the corporation passes from a fluid aggregation of unaffiliated public stockholders to a single controlling entity or cohesive group. If the post-merger entity would continue to have a dispersed ownership structure, the transaction may be reviewed under the business judgment rule or under intermediate Unocal scrutiny, depending on the circumstances.
Leveraged Recapitalization / Share Buyback. A leveraged recapitalization — in which the Company takes on significant debt to fund a large special dividend or share repurchase program — would typically be reviewed under the business judgment rule, unless the recapitalization is structured as a defensive measure in response to the Corvus Peak proxy contest, in which case Unocal scrutiny would apply. A leveraged recapitalization can be an effective mechanism for returning value to stockholders and for signaling management's confidence in the Company's future cash flows, but it also increases the Company's leverage and reduces financial flexibility.
Joint Venture / Strategic Partnership. A joint venture or strategic partnership arrangement — for example, a content licensing or co-production arrangement with a major streaming platform, or a technology partnership for the Company's e-commerce operations — would generally be reviewed under the business judgment rule and would not trigger Revlon duties unless the arrangement is structured in a manner that effectively transfers control of the Company.
AGMG's enterprise value of approximately $8.65 billion (based on the market capitalization as of March 1, 2024) is the relevant benchmark against which an