Duncan Energy Partners L.P. Investor Files Lawsuit To Stop Buyout

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Company Name(s): 
Duncan Energy Partners
Case Name: 
Duncan Energy Partners Deal Case 03/11/11
Case Status: 
Lawsuit Filed
Affected Securities
NYSE: DEP
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
03/11/2011
Class Period End: 
02/22/2011
Summary: 

An investor in Duncan Energy Partners L.P. filed a lawsuit in effort to block the a proposed buyout of Duncan Energy Partners by its majority owner, Enterprise Products Partners LP

According to the complaint the plaintiff alleges that the board of Directors of Duncan Energy Partners breached their fiduciary duties arising out of their attempt to sell Duncan Energy Partners, L.P. to Enterprise Products Partners, L.P.

On Wednesday, Feb 23, 2011, Duncan Energy Partners L.P.(NYSE:DEP) had announced that the chairman of the Audit, Conflicts and Governance Committee of the board of directors of Duncan Energy Partners' general partner received a proposal from Enterprise Products Partners L.P. (NYSE:EPD) whereby Enterprise Products Partners L.P. and certain affiliates would acquire all of the outstanding publicly-held common units of Duncan Energy Partners through a unit-for-unit exchange. Enterprise Products Partners L.P is proposing consideration of 0.9545 Enterprise Products Partners L.P common units for each issued and outstanding publicly-held Duncan Energy Partners (DEP) common unit. The consideration represents a value of $42.00 for each Duncan Energy Partners common unit based on the 10-day average closing price of Duncan Energy Partners common units and the closing price of Enterprise common units on February 18, 2011.

Indeed shares of Duncan Energy Partners L.P. (NYSE DEP) jumped in open market in response to the takeover proposal from $32.50 during Tuesday to $40.33 per shares.

However the plaintiff alleges that the proposed unit-for-unit exchange is “unfair and grossly inadequate” given the company's “anticipated continued growth” and the Board of Directors failed to maximize shareholder value. In fact Duncan Energy Partners’ performance for its shareholders was increasing. Even though Duncan Energy Partners’ 12months Total Revenue decreased from $1,263million in 2006 to $979.30million in 2009, its Net Income rose from $51.68million in 2006 to $91.10million in 2009. For the first three quarters in 2010 Duncan Energy Partners L.P. reported a combined nine months Total Revenue of $839.50million with a combined nine months Net Income of $65.10million. Additionally Enterprise Products Partners L.P owns already 100 % of the general partner of Duncan Energy Partners and owns already approximately 58 % of the outstanding common units of Duncan Energy Partners (DEP). The plaintiff alleges that, due to Enterprise Products Partners' control of Duncan Energy Partners and the general partner of Duncan Energy Partners, Duncan Energy Partners and its Board of Directors have engaged in conduct that has allowed them to stand on both sides of the proposed transaction, negotiating for their benefit to the detriment of Duncan Energy Partners' public shareholders.