Suit May Further Snarl Energy Factors Takeover
Sithe Energies’ already complicated acquisition of San Diego-based Energy Factors grew even more tangled last week when a disgruntled Energy Factors shareholder initiated a class-action suit that described Sithe’s recent $6.50-per-share offer for Energy Factors as “inadequate.”
Copies of the suit, which will be filed in the Supreme Court of the State of New York, were served on Sithe last week, according to a spokesman for Goodkind, Weschler, Labaton & Rudoff, the New York City law firm that prepared the suit for William Steiner, a Great Neck, N.Y., resident who owns Energy Factors stock.
The suit alleges that Sithe is “trying to take over Energy Factors at an inadequate price,” according to the spokesman, who did not know how many Energy Factors shares Steiner owns. The spokesman would not comment on when the suit was to be filed.
The suit alleges that Sithe, which owns 55% of Energy Factors’ outstanding common shares, violated its fiduciary duty to Energy Factors minority shareholders by offering to acquire Energy Factors’ remaining stock at $6.50 per share.
No ‘Big Deal’
“This is just a standard lawsuit filed by a company that files lots of (class-action) lawsuits,” Sithe spokesman Steve Burton said Monday. “I don’t think it’s any big deal.”
Sithe “believes it has acted properly in making its merger proposal and intends to vigorously defend this lawsuit,” Burton said.
The suit seeks unspecified monetary damages and asks that Sithe be prohibited from completing its $6.50-per-share bid for Energy Factors.
Sithe’s offer to pay $6.50 per share, or $27 million, for Energy Factors’ remaining shares was the latest in a complicated series of proposed deals involving Sithe and Energy Factors.
Needed New Capital
In May, Sithe offered $17.25 per share, or $80 million, for Energy Factors. Energy Factors, which builds and operates alternative energy projects, agreed to be acquired by Sithe in order to get new capital to finance construction of several proposed energy projects.
But Sithe, a New York-based builder and operator of hydroelectric plants, backed away from that proposed $80-million acquisition on June 3.
On June 19, Sithe said that it would instead buy 70% of Energy Factors’ stock during the coming year in a deal valued at $100 million. Sithe acquired 4.7 million shares of newly issued Energy Factors common stock for $10 per share and agreed to buy an additional 5.2 million shares of to-be-issued stock for $52.5 million on or before May 15, 1988.
Sithe unveiled the latest $6.50 per-share offer for Energy Factors’ remaining shares on Nov. 6. Analysts at the time speculated that Sithe developed the latest bid in the wake of the Oct. 19 market crash. Energy Factors’ stock, which was trading at about $8 before the crash, since has traded at about $6.
Energy Factors shareholders were bound to be disappointed by the proposed merger, analysts said at the time, because most shareholders bought the company’s stock at prices well above $6.50.
Energy Factors recently asked a committee that includes several of the company’s outside members of its board of directors to determine if Sithe’s $6.50-per-share bid was adequate. That committee evidently has not yet completed its report.
