Judge tosses shareholder suit in Vectren merger

A federal judge has turned away a shareholder lawsuit over a major Indiana utility’s 2018 merger with a Texas-based public utility holding company, using a back-to-school analogy to reason his dismissal of the litigation.

Judge Richard Young dismissed a suit brought by Vectren Corp. shareholders who objected to the utility’s merger with CenterPoint Energy Inc. The merger was announced in April 2018 and closed in the first quarter of 2019. Sixty-one percent of shareholders in Vectren, which provides natural gas and electricity service to more than 1 million customers in southern Indiana and portions of Ohio, approved the $6 billion deal, under which CenterPoint paid $72 per share of Vectren stock and assumed Vectren’s debt.

Dissenting shareholders sued in a bid to block the merger. After seven suits were consolidated, plaintiffs unsuccessfully moved Young to grant an injunction stopping the shareholder vote. After shareholders approved the merger, the dissenting shareholders’ amended complaint alleged Vectren’s proxy statement failed to forecast cash flow projections from 2018 through 2027, in violation of Securities and Exchange Commission rules.

“This critical information, the shareholders insist, was necessary for them to sufficiently assess the values of their shares, and without it, the proxy statement is misleading … ,” Young wrote.

But Young dismissed the shareholder suit with prejudice Friday, likening the dispute to elementary math.

“Students throughout the country returned to school this month. Some were excited. Others were disappointed. Many will study math this year. And most who do will bemoan missing points on their test because they did not ‘show their work’ even if their answer was otherwise correct. … This securities case is more or less about that: showing your work,” Young wrote.

“… Considering all the other financial information in the proxy statement, the disclosure of unlevered cash flow and the business-line projections would not have made a difference to a reasonable shareholder,” the judge continued. “And even if it would have, the shareholders have not sufficiently alleged that the omissions actually caused the harm for which they seek damages. Consequently, the shareholders’ claims must be dismissed.

“… Proxy statements do not have to disclose everything that might be of interest to shareholders. This rule protects shareholders,” Young wrote. “So long as the proxy statement includes the material information related to the acquisition, no securities laws are violated. Which brings us back to the beginning: Vectren ‘showed enough work’ here because the Proxy Statement disclosed the material information related to the merger, and even if the Proxy Statement omitted material information, those omissions did not cause the shareholders any economic harm.”

Young observed in a footnote that courts ordinarily would grant a party at least one opportunity to amend a complaint, but he explained his dismissal with prejudice: “Any amendment … would be futile” because the proxy statement disclosed all the relevant, material information.

The case in the Evansville Division of the U.S. District Court for the Southern District of Indiana is Michael Kuebler, et al. v. Vectren Corp., et al., 3:18-113.

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