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Avista Merger Proxy Omits Material Information Class Action

Avista Corporation and Hydro One Limited are both regulated electricity and natural gas companies, and if the merger just proposed goes through, they will together become one of the largest regulated utilities in North America, serving Ontario, Washington, Oregon, Idaho, Montana, and Alaska. Under the deal, Hydro One would pay Avista stockholders $53 per share, for a transaction valued at $5.3 billion. But is this a fair price? The complaint for this class action claims that shareholders are not being given enough information to assess the deal.  

The class for this action is all holders of Avista’s common stock who are being, and will be, harmed by Avista’s actions.

The proposed transaction was announced jointly by Avista and Hydro One on July 19, 2017, the same day the Merger Agreement was signed. Avista filed a Preliminary Proxy Statement with the Securities and Exchange Commission (SEC) on September 14, 2017, but the complaint claims that too much information is missing from it to allow shareholders to evaluate the figures and projections laid out by financial advisor Merrill Lynch, Pierce, Fenner & Smith. According to the complaint, the omissions violate Sections 14(a) and 20(a) of the Securities Exchange Act of 1934.

The main analyses that Merrill Lynch used to form its fairness opinion were its Selected Publicly Traded Companies Analysis, Discounted Cash Flow Analysis, and Selected Precedent Transactions Analysis, the complaint claims, all of which used financial projections provided by Avista’s management. But the complaint alleges that the Proxy, which the shareholders will use to make a decision, contains insufficient information about both Merrill Lynch’s financial analyses and Avista’s projections.

For one thing, the complaint alleges, the Proxy does not provide enough information about key inputs and assumptions, such as individual multiples and financial metrics for comparable companies and individual multiples for comparable transactions.

The complaint also alleges that where non-GAAP measures are used, the Proxy does not provide comparable GAAP measures or the line-item metrics used to calculate them. Without them, the complaint claims, the Proxy can simply be “cherry-picking the disclosed projections” so that the financial analyses become materially misleading.

The complaint requests that the court forbid the company from proceeding with the transaction and require that it remedy the misleading Proxy. 

Article Type: Lawsuit
Topic: Securities

Most Recent Case Event

Avista Merger Proxy Omits Material Information Complaint

September 25, 2017

Avista Corporation and Hydro One Limited are both regulated electricity and natural gas companies, and if the merger just proposed goes through, they will together become one of the largest regulated utilities in North America, serving Ontario, Washington, Oregon, Idaho, Montana, and Alaska. But the complaint for this class action claims that shareholders are not being given enough information to assess the deal. For one thing, the complaint alleges, the Proxy does not provide enough information about key inputs and assumptions underlying analyses; also, where non-GAAP measures are used, the Proxy does not provide comparable GAAP measures or the line-item metrics used to calculate them. 

avista_sec_complaint.pdf

Case Event History

Avista Merger Proxy Omits Material Information Complaint

September 25, 2017

Avista Corporation and Hydro One Limited are both regulated electricity and natural gas companies, and if the merger just proposed goes through, they will together become one of the largest regulated utilities in North America, serving Ontario, Washington, Oregon, Idaho, Montana, and Alaska. But the complaint for this class action claims that shareholders are not being given enough information to assess the deal. For one thing, the complaint alleges, the Proxy does not provide enough information about key inputs and assumptions underlying analyses; also, where non-GAAP measures are used, the Proxy does not provide comparable GAAP measures or the line-item metrics used to calculate them. 

avista_sec_complaint.pdf
Tags: Mergers or Acquisitions, Providing False or Misleading Information, Proxy Statement, Securities