Duke Energy Corp. DUK has agreed to pay its shareholders about $146 million to settle a shareholder lawsuit alleging that it failed to unveil 2012 merger details with Progress Energy Inc. The company was also charged of a hasty boardroom takeover that upended leadership plans for the combined entity.
Duke Energy’s July 2012 buyout of Progress Energy made it the nation’s largest power company and enabled it to enter the Florida electricity market as Duke Energy Florida.
Per the deal, Mr. Bill Johnson was to head the combined company, while the then Duke CEO Jim Rogers was to become the executive chairman. However, just hours after the merger closed, the combined board, which had a majority of legacy Duke directors, voted to install Mr. Rogers as CEO.
Shareholders of Duke Energy suffered from the decision. This prompted regulators to initiate investigations while the shareholders filed a lawsuit claiming that Duke Energy purposely misled them by naming Johnson as the head of the combined entity.
Although denying any wrongdoing, Duke Energy and its executives and directors said that the settlement has been made to avoid the cost of a prolonged litigation and eliminate uncertainty. It also added that the major cost of the settlement will be covered by a special type of corporate-insurance policy, while it has set aside a reserve of $26 million for the rest.
The newly proposed lawsuit settlement is subject to the approval of the U.S. District Court for the Western District of North Carolina in Charlotte.
The settlement covers investors who bought Duke Energy shares between Jun 11, 2012 and Jul 9, 2012. This also includes former Progress Energy shareholders who acquired shares in the combined company after the merger.
Last month, Duke Energy posted adjusted fourth-quarter 2014 earnings of 86 cents per share that came in below the Zacks Consensus Estimate of 88 cents by 2.3%. Quarterly earnings also decreased 14% from the year-ago figure. A strong performance at Commercial Power was more than offset by a weak International Energy business. Higher operating expenses also aggravated results.
Duke Energy currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Abengoa Yield plc ABY, Alliant Energy Corporation LNT and Avista Corp. AVA. While Abengoa sports a Zacks Rank #1 (Strong Buy), Alliant Energy and Avista hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment