The suit requests a preliminary injunction with a temporary restraining order prohibiting Diamond from selling its assets to any company other than Alliance Entertainment, and a hearing on its complaint. The complaint asks for an order compelling Diamond to sell its assets to Alliance Entertainment; awarding Alliance its fees and costs for the suit, and "other and further relief." Alliance asked for an expedited hearing on the complaint.
Diamond filed a motion last week asking the court to approve the sale of the company's assets to the joint back-up bidder, stating that it had now determined that the back-up bid was superior to the bid it had determined was the winner on the day of the auction. The back-up bid, which includes changes from the bid that was their final bid on the day of the auction, uses formulae based on Diamond's financials to determine the price, which is not specified as a single number. Diamond said that the decision to change the winner of the auction had been made in consultation with investment bankers Raymond James, their professionals, the unsecured creditors committee, and their bank.
According to the complaint, the suit arose from Diamond's "…inexplicable refusal to… consummate the sale of their assets to the successful bidder at an auction they conducted." An Alliance filing includes the negotiated Asset Purchase Agreement, which includes a number of changes negotiated after the auction, that brought the total price to $85,368,053, some $14.4 million more than the amount as the auction concluded.
As a side note, this amount is considerably above the amount Diamond disclosed as its liabilities in an earlier filing, although that number has likely changed from operating losses and fees.
The lawsuit alleges that before and after the auction, Diamond had been favoring the Universal/Ad Populum bidder, and that after the auction, Diamond "…negotiated in secret with Universal/Ad Populum," and "never engaged in 'good faith' or 'arms-length' negotiations with Alliance." It offers a detailed timeline of negotiations around the Asset Purchase Agreement in support of its allegations, argues that it has accepted all of the changes requested by Diamond since the auction, and says that it is ready to close at the higher price.
So in summary, Diamond has filed to switch its determination of the winning bidder at the auction to Universal/Ad Populum, and submitted a proposed Asset Purchase Agreement signed by all the parties based on that determination. Alliance has filed to have its asset purchase agreement accepted, and sued to force the issue. A hearing on the motions is scheduled for Monday.