WILMINGTON, Del. >> Digital Island Inc., an Internet services provider founded in Hawaii, withheld information about lucrative contracts before taking a $3.40 per share buyout by Cable & Wireless Plc., former shareholders said in a lawsuit. Digital Island sued
by ex-shareholdersBloomberg News
Telecommunications company Cable & Wireless bought Digital Island for about $340 million, including $49 million in debt, in August. In a suit filed in federal court in Delaware yesterday, eight ex-Digital Island shareholders claim the shares would have been worth more had directors revealed agreements to provide video data to media company Bloomberg LP and Internet services to Major League Baseball's Web site.
"There is little doubt that the disclosure of the Bloomberg and Major League Baseball deals" would have "dramatically increased shareholder value," according to the suit, which asks for class-action status, a jury trial, damages and legal fees. Bloomberg and Major League Baseball are not parties to the suit. The shareholders say Digital Island officers and directors received extra payments for stock options in the sale, and five executives were given "lucrative employment contracts," while "violating disclosure requirements" of federal securities laws.