As billionaire energy drink mogul Manoj Bhargava poses the threat of a hostile takeover to Cumulus Media, Sports Illustrated owner Authentic Brands Group has filed a lawsuit against Bhargava and his Arena Group, alleging failure to fulfill financial obligations for the rights to publish the magazine.
The legal action, lodged in the Southern District of New York, claims Bhargava and his company owe $48.75 million in unpaid fees alongside additional damages for copyright and trademark infringements.
Authentic Brands Group accuses Bhargava of engaging in “lawlessness” by missing payments, trying to renegotiate licensing fees, and obstructing the magazine’s transition to its new operator, Minute Media. The lawsuit details how Bhargava’s actions have not only risked the magazine’s future but also misused its intellectual property.
Bhargava took control of Arena Group, the publisher of Sports Illustrated, in a similar method to what he appears to be considering with Cumulus. The billionaire acquired a significant stake and its debts, leading to the replacement of the company’s CEO with his own executives.
The lawsuit also outlines how Bhargava’s management led to the shutdown of Sports Illustrated affiliated websites and hindered the handover of site data to Minute Media. Furthermore, it alleges improper use of the Sports Illustrated logo and branding, including a press release for 5-Hour Energy misleadingly presented as an editorial piece by Sports Illustrated.
Bhargava and Arena Group have not commented on the lawsuit. This legal challenge is among several lawsuits Bhargava faces related to his tenure at Sports Illustrated, including actions by former Arena Group executives for unpaid severance, punitive damages, and legal fees.
Bhargava recently increased his interest in Cumulus, via another of his companies, Renew Group. Renew initially acquired around 5% of Cumulus shares, but its stake has grown to 10.01% as of January 2023, with intentions to further increase its ownership to 20%.
This led Cumulus to launch a defensive strategy known as a “poison pill” to protect against a potential hostile takeover. This shareholder rights plan, valid until February 20, 2025, is designed to deter unwelcome acquisitions by diluting the stake of any entity that attempts to acquire more than 15% of Cumulus’s common stock without board approval.
The “poison pill” plan will issue one right for each share of Class A and Class B common stock, allowing shareholders to purchase additional shares at a discount, effectively reducing the acquirer’s control. Cumulus’s board retains the authority to end the plan as deemed necessary.
Bhargava also attained a significant stake in Audacy during its Chapter 11 restructuring, which is still pending FCC approval.
