Sale of Spectra resisted
Shareholders have filed five separate suits in two weeks against Spectra Energy Corp. and its board of directors, alleging the Houston pipeline company is selling itself too cheaply to the Canadian energy firm Enbridge.
The all-stock deal, valued at $28 billion, was announced in September and is expected to close early next year.
The lawsuits, each filed in U.S. District Court in Houston, ask the court to block the sale, alleging that Spectra should have sought other merger partners that might have been willing to pay more for the company.
Under the terms, Spectra stockholders would trade each share for slightly less than one share —
0.984 share — of the combined company, which would keep the Enbridge name.
Both Spectra and Enbridge executives touted the deal as an opportunity that would create the largest energy infrastructure company in North America while boosting values and dividends for shareholders.
Each of the shareholder lawsuits are seeking class action status to represent other shareholders, according to the plaintiffs’ local lawyer, Thomas Bilek.
Spectra said in a statement that it doesn’t comment on pending litigation.
It’s common for shareholders to file these kind of lawsuits once a merger is announced, but they are not usually successful, said James Edward Maloney, a Houston lawyer who specializes in securities law.
Shareholders, in filing the suits, typically have little to go on beyond speculation of whether the price is too high or too low, Maloney said.
The most recent suit, filed Saturday, criticized Spectra’s board for agreeing to several “coercive deal protection devices” in the merger agreement, including a “no solicitation” clause that prevents the company from seeking alternate bidders, “matching rights” that gave Enbridge four days to match a better offer, and a termination fee of $1 billion that Spectra would have to pay if it decided to pursue a competing offer, according to the lawsuit.
The cumulative effect of the stipulations, according to the lawsuit, is to “chill any potential post-deal market check.”