The feud between the Forbes family and the Asian buyers of Forbes Media shows no signs of abating — even after the new owners forked over roughly $22 million they owed on a promissory note.
Led by brothers Steve and Tim Forbes, the family claims its Highlander Management holding company is still owed another $44 million on the $416 million deal.
The dispute that is playing out in Delaware Chancery Court stems from a missed $46,000 interest payment that came due only weeks after the deal closed in September 2014. Most recently, Judge J. Travis Laster sided with the family and dismissed the buyers’ motion to toss the case.
“In terms of the motion to strike — I’ll be kind — that was just not a well-founded motion,” the judge said in his latest ruling.
The buyer, Integrated Whale Media, said the suit “is without merit and that the Forbes family, not IWM, is in breach of their obligations.” IWM said it’s meeting its obligations “and will continue to do so.”
The Forbes family walked away with a 5 percent stake and less than $100 million after selling the company, founded by B.C. Forbes in 1917. Steve Forbes also stayed on as chairman.
Clearly, their Scottish blood is boiling over what they regard as delaying tactics by IWM, a joint venture formed by Asia-based investors Tak Cheung Yam and Sammy Wong to buy the company two years ago.
One bone of contention is a $35 million escrow fund — consisting of cash and stock — that was set aside to cover any unforeseen liabilities. Still, the family expected to get their hands on the funds in September 2015 on the one-year anniversary of the deal.
Instead, two days before the funds would have been released by JPMorgan Chase, IWM said there was a dispute with a Ukrainian company, United Business Media, whose $2 million pre-paid license to publish had been yanked by Forbes. IWM said that dispute — which also ended up in a legal tussle — required holding onto the full $35 million. The case is now before an arbitrator.
The Forbes family insists it would only be on the hook for a few million dollars and, even in a worst-case scenario, most of the escrow funds should be released.
“Highlander Management entered into the purchase agreement with Integrated Whale and its principals in good faith and are deeply disappointed that they have failed to act in an honorable manner,” the family said in a statement.
The Forbes family called the counterclaims filed only last week by IWM “another example of Integrated Whale’s repeated pattern of retaliatory conduct to avoid upholding their contractual commitments.”
The original deal included $350 million in cash and another $66 million in long-term promissory notes.
But most of the cash — estimated to be close to $220 million — went to minority investor Elevation Partners, which includes U2 frontman Bono and Silicon Valley investor Roger McNamee. Elevation purchased a 45 percent stake in 2006 and secured rights as “preferred shareholders.”
The Asian buyers did gain one victory last month when a judge in the British Virgin Islands dismissed a Forbes family claim there and punted the case back to Delaware to be decided.
