Allegheny Energy, Inc. Investor Files Lawsuit Against AYE Board

JANUARY 2012 - The Seventh Circuit refused to revive the putative shareholder class action.

MARCH 2011 - Case dismissed.

An Allegheny Energy investor filed a lawsuit in Baltimore State Court on behalf of current investors in Allegheny Energy, Inc. (Public, NYSE:AYE), who purchased AYE shares before February 11, 2010, over alleged breaches of fiduciary duty in connection with an alleged unfair takeover.

According to the complaint the plaintiff alleges breaches of fiduciary duty arising out of the attempt to sell Allegheny Energy, Inc to FirstEnergy. On February 11, 2010 Allegheny Energy, Inc. (NYSE:AYE) and FirstEnergy (NYSE:FE) announced that both companies’ boards of directors have unanimously approved a definitive agreement in which the companies would combine in a stock-for-stock transaction. Under the terms of the agreement, Allegheny Energy, Inc shareholders would receive 0.667 shares of FirstEnergy common stock (FE) in exchange for each share of Allegheny (AYE) they own. Based on the closing stock prices for both companies on February 10, 2010, Allegheny shareholders would receive a value of $27.65 per share. According to Allegheny Energy, Inc the price per share represents a premium of 31.6 percent to the closing stock price of Allegheny on February 10, 2010, and a 22.3 percent premium to the average stock price of Allegheny over the last 60 days ending February 10, 2010.

According to the complaint the plaintiff alleges breach of fiduciary duty, that the transaction substantially undervalues Allegheny Energy shares, and that Allegheny Energy, Inc is selling itself too cheaply to First Energy, through an unfair process.

Shares of Allegheny Energy, Inc. (AYE) traded after the announcement at $23.40 per share, and at $21.59 per share days before the news. AYE shares were down from its 52weekHigh of $32.75 per share, $45.33 per share in August 2008, $54.75 per share in May ’08, and almost $65 per share in 2007. Allegheny Energy, Inc. reported in 2007 Total Revenue of $3.30702billion with Net Income of $421.21million, in 2088 Total Revenue of $3.3859billion with a Net Income of $395.40million, and in 2009 $3.4268billion with a Net Income of $392.8million.

Allegheny Energy, Inc., Greensburg, PA, is an integrated energy business that owns and operates electric generation facilities and delivers electric services to customers in Pennsylvania, West Virginia, Maryland and Virginia. Allegheny operates in two business segments: the Delivery and Services segment, which includes Allegheny’s electric transmission and distribution (T&D) operations, and the Generation and Marketing segment, which includes Allegheny’s power generation operations.