Questar Corp.is being targeted in a class-action shareholder lawsuit alleging that thecompany agreed to be purchasedby Dominion Resources Inc.for a sub-optimal price.
The plaintiffs allege that the proposed transactionundervalues Questar and that the board and Ronald Jibson, Questar's chairman,president and CEO, failed shareholders by not seeking out a more competitiveprice. The complaint named Questar, Jibson, Questar board members and Dominionas defendants.
The merger consideration — $25 per share — represents a22.6% premium over the closing price of Questar's stock on the last trading daybefore the deal was announced and a 30% premium over the preceding 20 days, butthe shareholder suit noted that the company's 52-week high was more than $26per share.
"[T]he proposed transaction, which was unanimouslyapproved by the company's board, is the product of a flawed process that isdesigned to ensure the sale of Questar to Dominion on terms preferential toDominion, but detrimental to … [the] public stockholders of Questar," saidthe complaint, filed in the U.S. District Court for the District of Utah. "Theconsideration offered to Questar stockholders is unfair and grossly inadequatebecause it does not reflect the intrinsic value of the company's common stock.Consequently, if the proposed transaction closes, Questar stockholders … willbe denied the growth opportunity the company has been touting."
The premium Dominion agreed to pay for Questar is below thepremiums inother recent major utilitymergers, such as the 36.3%premium Southern Co.agreed to pay for AGL ResourcesInc. and the 40%premium Duke Energy Corp.committed to in buying PiedmontNatural Gas Co. Inc. Neither Jibson nor the board solicited otherinterest during the merger agreement process with Dominion, the lawsuitasserted.
The complaint also contended that the proxy announcing theproposed transaction is missing "material information" that Questarshareholders would need to make an informed decision about the deal.Specifically, the suit said the proxy did not fully lay out Questar's financialprojections for each of its individual business segments, deprivingshareholders of the ability to understand the company's future cash flows. Theproxy is "also devoid of reasons why the board did not negotiate for aprice higher than $25," the complaint said.
Questar did not immediately respond to a request for commenton the litigation.