Intermix ex-CEO battles News Corp. sale to the finish.

If News Corp.'s $580 million acquisition of Intermix Media Inc. goes off as planned, don't expect Brad Greenspan to be celebrating.

The former chief executive and largest shareholder has spent the past few months complaining loudly that Intermix, operator of the popular MySpace.com Web site, was valued too low and that company executives were being paid too much.

As a scheduled shareholder vote approached last Friday, he and two other large shareholders filed lawsuits and last-minute motions attempting to delay it.

Greenspan points to recent filings showing that Chief Executive Richard Rosenblatt was promised more than $23 million in stock options for closing the News Corp. deal, while President Brett Brewer was granted $11 million. "This is not just a normal bonus for selling the company," Greenspan said last week. "It's a huge lottery win for management and insiders."

Details of the stock option package were not disclosed in the original Securities and Exchange Commission filings about the deal in July. "They had to make a special disclosure last week related to the options because they hadn't properly disclosed it in the first proxy," Greenspan fumed. "That move disincentivised them to go out and hold firm for a higher price."

In addition, the company's Series B and C shares, controlled by private equity firm VantagePoint Partners, will receive $14.60 and $13.50 per share in the deal, while regular shareholders receive just $12. VantagePoint's partners include Intermix directors David Carlick and Andrew Sheehan.

Separate lawsuits have been filed in Los Angeles Superior Court by Greenspan, who owns nearly 4 million shares (11 percent of the company), shareholder Ron Sheppard (40,000 shares) and investor John Friedmann (40,000 shares).

The lawsuits, which allege breach of fiduciary duty, self dealing and other misdeeds by Intermix executives, aren't likely to go away, no matter the outcome late last week. One of the conditions of closing the merger is the absence of injunctions issued by any court preventing its consummation. "Defending these actions may require significant attention and resources of management and, regardless of the outcome, result in significant legal expenses," reads the filing.

In a statement filed with the SEC, Intermix said: "We believe the lawsuits described above are meritless and we intend to vigorously defend against the claims and allegations in the complaints." The company declined to comment further.

(Greenspan also accuses Intermix executives and directors of insider trading. He alleges they unloaded shares worth $23 million in the weeks leading up to the announcement of New York Attorney General Eliot Spitzer's April investigation into alleged spyware distribution by the company's sites. Intermix's share price was halved to the $4-range before recovering later. The company settled the case for $7.5 million without an admission of guilt.)

News Corp., of course, is eager to snap up popular Internet companies because it is locked in a race with other large media giants to capture young Web viewers, who seem to be shunning the corporations' traditional media offerings.

Viacom Inc. bought teen virtual pet network Neopets Inc. for $160 million in June. News Corp. announced its purchase of video game site IGN Entertainment Inc. for $650 million in September. EBay Inc. is buying hip broadband phone service Skype Technologies SA for $4.1 billion.

"There's no way News Corp. is letting Intermix go," said John Tinker, an analyst with Think Equity Partners LLC and an Intermix shareholder. "Greenspan moved too late to have serious impact."

Since June, the number of MySpace users has jumped to more than 30 million from 16.5 million. Nielsen Netratings reported that online advertising on the MySpace.com reached 12.9 percent of all online ads in August, compared with 6.3 percent in May. Greenspan and other dissidents point to the site's growing popularity--and recent big-ticket Internet deals--as evidence that News Corp.'s offer was too low.

Greenspan cobbled together the counteroffer of $13.50 per share a few days before the shareholder meeting. The company rejected it as "speculative and incomplete." But Greenspan did succeed in delaying the shareholder vote by two days.

Greenspan has his own issues. He was forced to resign from the company in 2003 after earnings restatements and an SEC investigation that led to a Nasdaq de-listing, and the shares fell to about $2. That's one reason investors did not seem too worried about his threats. "Richard (Rosenblatt) took over a near-bankrupt company," Tinker said, "and created hundreds of millions in shareholder value."

Deal Highlights

Intermix Media Inc.'s planned sale to News Corp.

News Corp. Offer: $580 million, or $12 per share

Greenspan's Counter: $13.50 per share, for portion of shares

MySpace.com Growth: 30 million registered users in September, up from 16.5 million in June

Artists on MySpace: 500,000

Share of Online Ad Market: 12 percent

Other Internet Deals: Viacom Inc. buys Neopets Inc. for $160 million (June), News Corp. buys IGN Entertainment Inc. for $650 million (September), EBay Inc. buys Skype Technologies SA for $4.1 billion (September)