Crown Castle Co-Founder Sues to Block ‘Sweetheart Deal’ Between Board, ‘Activist’ Investor

Crown Castle co-founder Ted Miller brought suit Tuesday in Delaware Chancery Court to invalidate the “cooperation agreement” the Crown Castle board entered into with Elliott Investment Management, an “activist” Crown Castle investor.

The agreement “conferred valuable concessions and control upon Elliott,” said Miller’s complaint (docket 2024-0176). It includes “uncommon, noncommercial terms that raise significant questions" about the board's and Elliott's "incentives and loyalties,” it said.

The agreement creates new “fiber review” and “CEO search” board committees, locking in Elliott representation on both, said the complaint. It doesn’t require Elliott to maintain a minimum ownership stake in Crown Castle to keep those positions. The agreement also purports to set the board's size and requires the board to recommend that shareholders approve particular nominees, including the Elliott nominees, at the 2024 annual meeting, it said.

“In essence,” the board “struck a grand bargain” when it entered into the cooperation agreement with Elliott, said the complaint: Elliott gets influence over key decisions, including CEO selection and Crown Castle’s long-term fiber strategy, and the incumbent board members “get to keep their jobs,” it said.

In its haste to lock in a deal and “establish a frozen board,” the board members agreed to the cooperation agreement a month before the nomination window opened for the 2024 annual meeting and before they had an opportunity to hear “alternative proposals” from any other shareholders, said the complaint. As it stands, there’s “no mechanism in place” for shareholders to object to this “unusual arrangement,” it said.

The board didn’t respond to Miller’s “multiple attempted outreaches” between August and December until the day after it entered into the cooperation agreement with Elliott, said the complaint. Miller and the team from Boots Capital Management, Miller’s investment arm, met Dec. 27 with Crown Castle Chair Robert Bartolo and interim CEO Tony Melone to share Miller’s specific proposal to spin off Crown Castle’s fiber assets to an outside buyer, use the proceeds to pay down debt and fund a share buyback, it said.

Miller’s goal, and that of his Boots team, was to return Crown Castle to a “pure-play” cell tower business, “realizing billions in stockholder value,” said the complaint. Miller and Boots presented their plan to the full board Jan. 30, it said. Miller on Feb. 13 nominated himself and three other Boots executives for election to the Crown Castle board at the annual meeting, it said.

But the board’s apparent engagement “has been exposed as a mere charade,” said the complaint. On Feb. 14, through its counsel, Boots privately raised its concerns about how shareholder perception of the board’s “sweetheart deal” with Elliott “could derail” a timely fiber sale and result in substantial losses to Crown Castle shareholders, it said. The board responded, also through counsel, by stating definitively that it wouldn’t recommend Boots’ director candidates for election to the board, it said.

Through the cooperation agreement with Elliott, the board members “have acted unreasonably to entrench themselves in office, and have taken an unreasonable and disproportionate defensive measure in response to no genuine threat to any corporate interest or benefit,” said the complaint. As a result, critical company decisions would be “subject to the whims” of Elliott, including the selection of a CEO and adoption of a “new course” on fiber strategy, it said.

The affairs of Delaware corporations must be managed by boards, “not backroom deals,” said the complaint. Should Crown Castle be permitted to press forward, while the validity of the cooperation agreement stands in limbo, shareholders “face the threat of injury that cannot be quantified or unscrambled,” it said.

Miller seeks a declaratory judgment that key provisions of the cooperation agreement “are invalid and unenforceable under Delaware law,” said the complaint. He also seeks a determination that the board members breached their fiduciary duties to Crown Castle and its shareholders by entering into the “preclusive” cooperation agreement. He’s asking the court for an injunction, “or other appropriate equitable relief,” preventing the enforcement of the cooperation agreement’s “preclusive terms,” it said.