Shareholders sue to stop Spectra merger with Enbridge

Shareholders have filed five separate suits in two weeks against Spectra Energy Corp., alleging the Houston pipeline company is selling itself too cheaply to the Canadian energy firm Enbridge.

The all-stock deal, valued at $28 billion was announced in September, is expected to close early next year. The lawsuits, each filed in U.S. District Court in Houston, ask the court to block the sale, alleging that Spectra should have sought other merger partners who might have been willing to pay more for the company.

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Under the terms, Spectra stockholders would trade each share for slightly less than one share — 0.984 share — of the combined company, which will keep the Enbridge name. Both Spectra and Enbridge executives touted the deal as an opportunity that would create the largest energy infrastructure company in North America while boosting values and dividends for shareholders.

Each of the shareholder lawsuits are seeking class action status to represent other shareholders, according to the plaintiffs local lawyer Thomas Bilek.
Spectra said in statement that it doesn’t comment on pending litigation.

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The most recent suit, filed by Joseph McMillan, criticized Spectra’s board for agreeing to several “coercive deal protection devices” in the merger agreement, including a “no solicitation” clause that prevented alternate bidders from coming forward, “matching rights” that gave Enbridge four days to match a better offer, and a termination fee of $1 billion that Spectra would have to pay if it decides to pursue a competing offer, according to the lawsuit.

The cumulative effect of the stipulations, according to the lawsuit, is to “chill any potential post-deal market check.”

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