Silver Lake takes legal action against Icahn and hedge funds over Endeavor feal

Silver Lake has launched legal action against Carl Icahn and a group of hedge funds in Delaware, seeking to prevent them from using appraisal proceedings to pursue potential payouts linked to the PE firm’s 2025 acquisition of Endeavor Group Holdings, according to a repot by Reuters.

Silver Lake Technology Management filed the lawsuit in Delaware’s Court of Chancery, asking the court to rule that hedge funds that bought Endeavor shares after the planned takeover was announced should not be entitled to seek appraisal of those shares.

Silver Lake agreed in 2024 to take Endeavor private in a transaction valuing the entertainment and sports group at about $13bn, with shareholders due to receive $27.50 per share.

Under Delaware corporate law, shareholders who object to a merger can pursue an appraisal action if they believe the consideration offered does not represent the fair value of their shares. A judge subsequently determines the value based on evidence submitted by the parties, meaning the final amount can be higher or lower than the original transaction price.

The appraisal process has attracted specialist hedge funds that pursue so-called appraisal arbitrage, buying shares in companies facing mergers in the expectation that courts may ultimately determine a higher fair value.

According to Silver Lake’s lawsuit, a number of hedge funds began accumulating Endeavor shares following the announcement of its takeover, with some continuing to buy even after the stock traded above the $27.50 offer price.

Silver Lake argues that allowing such investors to pursue appraisal claims would amount to exploiting the legal mechanism for profit rather than protecting shareholders who opposed the transaction.

The private equity firm is seeking a ruling that could shield it from potentially hundreds of millions of dollars in additional payments if the hedge funds’ appraisal claims were allowed to proceed.

Endeavor was considered an especially attractive target for appraisal investors because of its interest in TKO Group Holdings, the company behind assets including World Wrestling Entertainment and Ultimate Fighting Championship. TKO’s shares rose significantly after the Endeavor transaction was announced, adding to the potential value of the investment strategy pursued by the appraisal-focused funds.

Silver Lake’s lawsuit also names Icahn, although he has pursued a separate legal route. Icahn filed a class action alleging that Endeavor’s management and Silver Lake breached their fiduciary duties and improperly transferred assets in ways that benefited insiders.

Silver Lake alleges that Icahn coordinated with the hedge funds over their Endeavor investments, an allegation that Icahn and the funds have denied. The private equity firm has also accused some of the hedge funds of failing to comply with securities disclosure requirements relating to their Endeavor holdings.