Three shareholders have filed two separate lawsuits in Harris County claiming that Kinder Morgan’s $21.1 billion purchase of El Paso Corp. is too cheap. The lawsuits, one by the city of Roseville Employees’ Retirement System and the other by individual investors Randy Abigt and Larry Sutton, claim El Paso is worth $28 share. Kinder Morgan is offering $26.87.
The suits, which are almost identical and seek class-action status on behalf of all El Paso shareholders, claim Kinder Morgan would gain additional benefits by eliminating a key competitor and that the entire sale process was riddled with conflicts of interest.
Yesterday, a pension fund sued Goldman Sachs in Delaware Chancery Court over its alleged conflicts in the deal. As Bloomberg News reported:
Goldman Sachs, which owns about 20 percent of Kinder Morgan, steered El Paso directors to sell at a price below its full value, earning larger advisory fees than if the company had completed a planned spinoff, lawyers for the Louisiana Municipal Police Employees Retirement System said in the complaint. Goldman Sachs also stands to see its Kinder Morgan investment increase in value, according to the complaint.
“The El Paso board impermissibly heeded the advice of its conflicted financial adviser Goldman Sachs and abandoned a previously announced spinoff of its exploration and production business in favor of a low premium sale to competitor Kinder Morgan,” lawyers for the retirement system, an investor in El Paso, said.
Goldman also upgraded its rating on Kinder Morgan stock ahead of the deal. While Kinder Morgan shareholders seem happy with the deal, El Paso investors — at least those who aren’t Carl Icahn — may be rethinking the benefits.