BGE shareholder sues to stop merger Firm's top officers accused of breaching fiduciary duty


January 26, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

A Baltimore Gas and Electric Co. shareholder claims in a lawsuit that the utility's top executives and board members failed to act in the stockholders' best interests when they voted to merge with Potomac Electric Power Co., a move that could delay or block the planned $2.9 billion corporate marriage.

The lawsuit, filed by shareholder Janice Wittman, also says that the company's 14 directors -- including BGE Chairman and Chief Executive Christian H. Poindexter and President and Chief Operating Officer Edward A. Crooke -- breached their "fiduciary duty" in approving the merger, which is expected to create the nation's ninth-largest power concern.

The Baltimore County Circuit Court lawsuit further contends that shareholders "are being deprived of the opportunity to maximize value of their BGE stock," because BGE's stock price dipped in the wake of the September announcement concerning Pepco.

The stock price has since risen 15.4 percent to an all-time high, closing yesterday at $29 per share.

"The allegations of wrongdoing in the complaint are nothing but conclusory boilerplate, unsubstantiated by allegations of supporting fact," BGE attorneys from Piper & Marbury say in a motion to dismiss the case.

It could not be determined what effect, if any, the lawsuit would have on the pending merger of BGE and Pepco, slated to occur no later than March 1997, or on a special shareholders meeting BGE has scheduled on March 15 for a vote on the merger.

Ms. Wittman's complaint asks that the court "permanently enjoin defendants from colluding and conspiring in the consummation of the merger for grossly inadequate and unfair consideration."

"Our position is any vote should be put on hold pending a full review," said Roger W. Kirby, a New York attorney representing Ms. Wittman.

The main issue at the center of the lawsuit appears to be the 20 percent premium that BGE will pay to Pepco shareholders to complete the merger, a percentage Ms. Wittman's attorneys contend is too high and has hampered the growth of BGE's common stock.

"Since the announcement of the merger, the historical premium of the stock price of the two companies has all but disappeared," Mr. Kirby said. "The Pepco shareholders appear to be coming out in a superior position."

He added that BGE's stock price should be $32.25 per share when compared to Pepco's stock price adjusted for the premium.

Mr. Kirby declined to provide details regarding Ms. Wittman, who owns BGE stock valued at roughly $7,000, or about 300 shares, according to the lawsuit.

The complaint against BGE's directors also asks that the case be converted into a class-action suit, in which numerous stockholders could join the case.

But an official motion to convert the case has not been filed.

In their motion for dismissal, the BGE's attorneys counter that the lone shareholder's complaint should be dismissed since BGE has 81,000 shareholders who control more than 147 million

shares valued at $4.3 billion as of yesterday.

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