TOPEKA, Kan. (CN) — After spending several months brokering a merger deal and revising it after rejection from regulators, Westar Energy and Great Plains Energy face a federal class action from Westar shareholders.
Westar, of Kansas, and Great Plains, of Missouri, announced a merger in July to create a $14 billion utility to serve 1.6 million customers.
But lead plaintiff David Pill says in the Thursday lawsuit that the two companies have not been forthcoming with financial information about the new company. Shareholders from both companies are to vote on the merger in coming months.
Pill claims that the companies and Westar executives purposely left out information in the S-4 filing with the Securities and Exchange Commission, failing to include earnings projections for the proposed new company, Monarch Energy Holdings.
“Financial projections are considered by courts to be among the most important information a stockholder can have when evaluating the proposed consideration in a merger and deciding whether to vote in favor of a merger,” the complaint states. “Here, the Monarch projections would be highly material to Westar’s shareholders because they are being asked to vote for a transaction in which they will receive Monarch shares, and the S-4 specifically warned such shareholders not to add together Westar’s and Great Plains’ projections.”
While the two companies shared projections for each separate company, they did not do so for Monarch. The merger proposal was submitted to regulators in Kansas and Missouri in late August. The companies hope to complete the merger by summer of 2018.
Pill calls statements from Westar executives misleading and asks the court to enjoin the merger unless and until the companies publish more detailed information about Monarch.
“Defendants prepared, reviewed, filed and disseminated the false and misleading S-4 to Westars’s shareholders,” the complaint states. “In doing so, defendants knew or recklessly disregarded that the S-4 failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.”
Pill is represented by Michelle Moe Witte with Joseph, Hollander & Craft, of Wichita.