Genon Energy Inc (NYSE:GEN) Investor Files Lawsuit Against Directors Over Alleged Breaches Of Fiduciary Duties In Connection With The Proposed Merger With NRG Energy, Inc

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Company Name(s): 
Genon Energy
Case Name: 
Genon Energy Deal Case 07/23/2012
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Proposed
Affected Securities
NYSE: GEN
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
07/23/2012
Summary: 

October 25, 2012 (Update) -- GenOn Energy, Inc. shareholder class actions (eight suits consolidated in Delaware Chancery) seeking to block its merger with NRG Energy Inc. has been tentatively settled.

July 24, 2012 (Shareholders Foundation) -- An investor in shares of Genon Energy Inc (NYSE:GEN) filed a lawsuit against direcotrs of Genon Energy Inc in effort to stop the proposed takeover of Genon Energy by NRG Energy, Inc at a value of $2.19488 per NYSE:GEN share.

The plaintiff alleges that the defendant breached their fiduciary duties owed to Genon Energy Inc (NYSE:GEN investors arising out of their attempt to sell the company too cheaply and via an unfair process to NRG Energy.

On July 22, 2012, Genon Energy Inc and NRG Energy, Inc. announced they have signed an agreement to combine the two companies. Under the terms of the proposed transaction NYSE:GEN shareholders will receive 0.1216 of a share of NYSE: NRG) common stock in exchange for each NYSE:GEN share of common stock. Based on a closing price of NYSE:NRG shares on July 20, 2012, of $18.05 per share, NYSE:GEN shareholders will receive a value of $2.19488 per NYSE:GEN share.

However, the plaintiff claims that the current offer is unfair to NYSE:GEN stockholders and undervalues the company. Indeed, at least one analyst has set the high target price for NYSE:GEN shares at $4.50 per share. Furthermore, NYSE:GEN shares traded as early as May 9, 2012 as high as $2.20 per share, in March 2012 as high as $2.62 per share, and roughly one year ago at over $4 per share, thus all well above the current offer and therefore asking certain NYSE:GEN stockholders to hand over their shares at a discount.

In addition, so the plaintiff, the proposed acquisition is the product of a fundamentally unfair process that is designed to ensure the sale of Genon Energy to one buyer, and one buyer only – NRG Energy - on terms preferential to NRG Energy and Genon’s Board members but detrimental to all other NSYE:GEN investors. The plaintiff alleges that the board of directors of Genon Energy Inc breach its fiduciary duties by agreeing to preclusive deal protection devices in connection with the merger agreement, such as a no-solicitation, a matching rights, and a $60million termination fee provision, that collectively preclude any competing offers for the company.