Archive for Saturday, May 25, 2002

Aquila faces lawsuits over stock buyback

May 25, 2002


— Energy wholesaler Aquila Inc. is facing three securities class-action lawsuits alleging it cheated shareholders when the company bought back 20 percent of its Aquila energy trading arm in January.

The lawsuits, which are identically worded, were all filed in federal court in Kansas City in the last few weeks. They say Aquila, which was then known as UtiliCorp United Inc., failed to form an independent audit committee after it spun off 20 percent of Aquila's stock in April 2001. Before that, Aquila was a wholly-owned subsidiary of UtiliCorp.

The companies merged again nine months later when UtiliCorp officials decided Aquila needed the help of UtiliCorp's balance sheet and UtiliCorp reacquired the shares. UtiliCorp then changed its name to Aquila.

The lawsuits charge that the failure to form an audit committee allowed UtiliCorp to buy back the stock at a non-negotiated and less than optimum price per share.

"We're confident these claims will not stand up in court," said Ethan Hirsh, spokesman for Aquila, the country's fourth-largest utility owner and energy trader.

Aquila officials declined further comment.

One court has already rejected similar claims in a lawsuit that tried to block the stock buyback. In January, the Chancery Court of Delaware, where Aquila is incorporated, ruled that Aquila stockholders should not be deprived of the "valuable opportunity to determine for themselves" whether to accept UtiliCorp's tender offer.

More than three-quarters of Aquila shareholders accepted the tender offer, which was completed Jan. 7.

The Delaware lawsuit arose because UtiliCorp had pledged to form an audit committee of at least two independent directors within three months of the spinoff or by July 25, 2001. That however, didn't happen as UtiliCorp disclosed in a public filing on Dec. 3, 2001, more than four months later.

In the meantime, Aquila's stock had fallen below its spinoff price of $24, even as the company boasted impressive financial results. The stock's decline came amid a drop in energy prices and energy trader Enron's tumble in bankruptcy after Enron restated its profits and questions arose about is accounting practices.

Aquila's stock closed Thursday at $15.04, up 38 cents.

Commenting has been disabled for this item.