NSTAR Investor Files Lawsuit Against Merger With Northeast Utilities

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Company Name(s): 
Case Name: 
NSTAR Deal Case 10/19/2010
Case Status: 
Lawsuit Filed
Affected Securities
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 

An investor in NSTAR filed a lawsuit in State Court against Nstar, Northeast Utilities, and directors of NStar in connection with their attempt to merge NStar with Northeast Utilities to the disadvantage to NStar shareholders.

According to the complaint the plaintiff alleges that the directors of NStar their fiduciary duties owed to NSTAR (NYSE:NST) investors arising out of their attempt to merge NStar with Northeast Utilities via an unfair process at an unfair price.

On Monday, October 18, 2010, NSTAR (NYSE:NST) and Northeast Utilities (NYSE:NU) announced that both companies’ Boards of Trustees have unanimously approved a merger agreement, under which NSTAR shareholders would receive 1.312 Northeast Utilities common shares for each NSTAR share that they own in a transaction with a total equity value of $9.5 billion and an enterprise value of $17.5 billion.

Shares of NSTAR (NYSE:NST) traded before the announcement at $39.66 per share and increased as much as $40.83 per share in response to the takeover news. But the plaintiff said the defendants failed to ensure that NST investors will received maximum value for their shares and the merger of equals would end with Northeast Utilities investors holding 56% while NStar investors only would own 44% of the combined company. NSTAR itself had to admit that the exchange ratio reflects a no premium merger based on the average closing share price of each company for the preceding 20 trading days. In addition the plaintiff claims that the current offer undervalues NStar, particularly when considering the company’s present and future growth and profitability objectives. NSTAR reported over the past four years relatively stable 12 months total revenues ranging from $3.05billion to $3.58billion. Its Net income rose from $208.73million in 2006 to $255.21million in 2009. Further the merger agreement includes other preclusive corporate and deal protections to inhabit an alternate, and perhaps superior, transaction, such as a $135million termination fee and up to $35million expenses under certain circumstances.