Merger proposal triggers third Baton Rouge lawsuit

A recently filed investor lawsuit marks the third case filed this month in the Baton Rouge state court since last month’s announcement of the proposed sale of Shaw Group, Inc. to Dutch oil and gas firm CB&I. In the latest round of business litigation, KBC Asset Management accuses Shaw’s board of directors of breaching its fiduciary duty by accepting a merger deal that significantly undervalues the company and serves the best interests of the company’s founder rather than the interests of shareholders.

The merger proposal would sell Shaw Group, an international construction and engineering firm, to the firm formerly known as Chicago Bridge & Iron for a total of $3 billion. Shares of Shaw Group, which operates its worldwide headquarters in Baton Rouge, had declined 8 percent in the past year to their lowest price in five years. CB&I’s $46 per share offering price represented a 72 percent increase over Shaw’s stock price the day before the sale was announced.

Despite the fact that CB&I’s offer appears to be a good deal for shareholders, KBC asserts that the sale was orchestrated to take advantage of depressed stock prices at a time when an $18 billion dollar project backlog and four new nuclear power plant contracts put Shaw in a position to see substantial profit increases in the near future.

The lawsuit also points to a retirement payout that includes more than $24 million in compensation plus the use of a private jet and a country club membership as evidence that Shaw’s founder manipulated the sales process for his own benefit and not in the interest of shareholders.

The KBC suit, like the two suits already filed, seeks certification for class action status and an injunction to halt the sale.

Source: The Advocate, “Investment manager contests Shaw sale in lawsuit,” Joe Gyan, Aug. 22, 2012