Shareholders of Tucson Electric Power Co.’s parent corporation, UNS Energy, have filed a pair of lawsuits in Pima County Superior Court in an effort to halt a Canadian company’s planned acquisition of the power provider.
Paul Parshall and Phillip Malenovshy, identified in the complaints filed on Dec. 20 as UNS stockholders, separately claim the proposed merger represents a breach of the company’s fiduciary duties.
“They failed to take steps to maximize the value of UNS to its public shareholders and took steps to avoid competitive bidding, to cap the value of UNS’ stock and erected unreasonable barriers to other third-party bidders,” Parshall’s lawsuit reads.
Both lawsuits — which seek class-action status — also say the proposed $4.3 billion merger with Fortis Inc., announced on Dec. 12, unfairly benefits Fortis and the UNS board at the expense of shareholders.
The suits name UNS CEO and Chairman Paul J. Bonavia, and board members David G. Hutchens, Lawrence J. Aldrich, Barbara M. Baumann, Larry W. Bickle, Robert A. Elliott, Daniel W. L. Fessler, Louise L. Francesconi, Ramiro G. Peru, Gregory A. Pivirotto and Joaquin Ruiz.
The complaint also names FortisUS, a subsidiary of Fortis Inc., the Canadian investor-owned potential buyer.
TEP and UNS spokesman Joseph Barrios said in an email that lawsuits such as these commonly follow the announcement of large mergers.
“It’s not unusual for law firms to file lawsuits in these types of situations,” Barrios wrote, declining to comment further.
Several law firms specializing in class-action litigation have solicited shareholders with public offers to pursue cases against the proposed merger.
The firms Levi & Korsinsky, Kirby McInerney LLP, Rigrodsky & Long, P.A., the Briscoe Law Firm PLLC and Powers Taylor LLP are a few that issued news releases notifying investors of plans to investigate the proposed merger in the days following the announcement.
Scottsdale-based law firm Scheider Wallace Cottrell Konecky LLP filed the complaints in Pima County on behalf of both plaintiffs.
The firm did not respond to a call for comment on the lawsuits.
The lawsuits also take issue with how the merger deal unfolded.
Both say the merger agreement favors FortisUS over other potential buyers by requiring UNS to notify the company of any other potential offers, allowing FortisUS to beat another offer by matching it, and to pay FortisUS a $63.9 million termination fee if UNS pursues a competing offer.
While the lawsuits note UNS continues to see increased income and would pay shareholders a dividend, the claims say the sale would deprive shareholders of future profits.
“The proposed transaction fails to properly compensate UNS shareholders for their lost future earnings — through both the company’s growth and its continual dividend payments to shareholders,” Parshall’s complaint reads.
Maurice E. May, an equity analyst with Power Insights/Wellington Shields in New York City, said despite the lawsuits the deal appears standard and would likely benefit shareholders.
“They’re getting a market price that shareholders probably wouldn’t see for five years,” May said.
He said the purchase price of $60.25 per share represented a 25 to 30 percent premium for shareholders.
As a matter of disclosure, May said he’s the trustee, but not a beneficiary, of a family trust that owns shares in UNS.
May added that utilities face stringent regulation at the state level and any merger would require approval from the Arizona Corporation Commission.
The ACC, for example, denied the 2004 sale of TEP’s parent company, saying it posed too much risk for ratepayers.
May said the current proposal likely would present less risk because Fortis, unlike the proposed buyer in 2004, would remain an owner-operator.
“You don’t generally see corporate raiders taking over utility companies,” he said.
UNS has not yet filed paperwork with the ACC regarding the sale. That likely will occur early next year.