Investor Suit Says TransCanada-Columbia $10B Merger Unfair

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By Michael Greene

April 5 — Investors are challenging TransCanada Corp.'s $10.2 billion proposed acquisition of Columbia Pipeline Group Inc., saying the deal is the “product of a hopelessly flawed process” that undervalues the company and its prospects.

Columbia's board and management and its largest shareholder, JPMorgan Chase & Co., are driving a proposed acquisition that will provide them with preferential benefits, the investors alleged in their would-be class action filed March 30 in the Delaware Chancery Court.

According to the complaint, the deal process was tainted by conflict. The investors said that JPMorgan will be able to cash in on over $1.1 billion of its illiquid Columbia holdings and that Columbia officers and directors stand to receive millions of dollars in special benefits if the deal goes through.

The lawsuit asserts breach of fiduciary duty claims against Columbia directors and aiding and abetting claims against TransCanada. The investors seek injunctive relief barring the proposed acquisition, unless the company adopts measures to obtain the highest possible deal price.

Columbia representatives didn't immediately respond to Bloomberg BNA's request for comment.

‘Unfair Price.'

On March 17, the companies announced that TransCanada had agreed to pay $25.50 per share to Columbia holders, in a deal to help the company expand its gas pipeline business . The deal price represented a 11 percent premium on the company's March 16 closing price.

The investors claimed that the deal was timed to allow TransCanada to take advantage of a downturn in the energy market. Their complaint said the company's stock traded at a market high of $33 per share in June 2015.

“CPG’s prospects are excellent and growing,” the filing said. “But rather than pursue the Company’s current strategy, with its strong prospects, the Board agreed, for its own interests, to sell CPG on the cheap, ignoring its duty to maximize stockholder value.”

In addition to challenging the deal process, the investors assert that the merger agreement contains measures that illegally foreclose topping bids.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com