Columbia Pipeline Group, Inc. is facing a proposed class action over a merger with TransCanada Corporation that closed in July 2016. Also named as defendants in the suit are the company’s former CEO, CFO, and President, who the case claims engineered a deceptive scheme to secure “change-in-control benefits” for themselves while shorting stockholders on the value of their shares.
The case explains that in July 2015, Columbia Pipeline separated itself from NiSource, Inc. to become a stand-alone, publicly traded company. Less than a year later, the complaint continues, Columbia began negotiating a merger with TransCanada and released a proxy statement to win shareholder support of the transaction. The suit argues that the proxy statement failed to disclose the true background and purpose of the sale – that the individual defendants had conspired with TransCanada “as part of a self-interested plan to cash in on lucrative change-in-control benefits.”
The lawsuit alleges that the company’s top executives were set to retire after decades of service at NiSource but would not receive “golden parachutes” if they retired directly from NiSource. According to the complaint, the defendants executed a scheme to protect their own interests by breaking Columbia away from NiSource and virtually guaranteeing that the company would be acquired by TransCanada less than a year later – a transaction that would award them change-in-control benefits upon their retirement. The case claims the defendants concealed TransCanada’s prior interest in acquiring the company while it was still part of NiSource, deflected offers from other prospective buyers, and failed to negotiate the best value for stockholders in the proposed merger.
As a result, the suit concludes, stockholders were misled into supporting a merger that was “well below fair value for their Columbia Pipeline shares.”