A Delta Natural Gas shareholder has filed a federal class-action suit alleging that the Winchester-based company violated the Securities and Exchange Act of 1934 in its proposed merger with an affiliate of Peoples Natural Gas.
Under the terms of the proposed acquisition announced in February, Delta shareholders would receive $30.50 in cash for each share of Delta stock. The deal is expected to close by the end of the year.
After the close of the transaction, Delta would be a wholly owned subsidiary of PNG Companies LLC.
The shareholder, Paul Parshall, who has no address listed in the lawsuit filed in U.S. District Court in Lexington, claims that the Delta board of directors rendered a proxy statement that is “false and misleading” and precluded other bidders from making competing offers.
Randall Strause, the Louisville attorney who filed the suit on behalf of Parshall, declined to answer questions about the suit or identify where Parshall lives.
Greg Coker, a spokesman for Delta, said Monday that the company “feels strongly the claims have no merit and we will vigorously defend” against the suit.
The suit also alleges that the value of Delta is worth more than the amount offered in the transaction, and that the proposed merger “fails to adequately compensate the company’s stockholders.”
The proposed transaction will deny class members “their right to share proportionately and equitably in the true value of the company’s valuable and profitable business, and future growth and earnings,” the lawsuit says.
The suit also alleges that the company’s five executive officers stand to receive more than $14.7 million “in change-in-control payments in connection with the proposed transaction.”
A similar suit was filed last month in Clark Circuit Court by another Delta shareholder.
The transaction is subject to the approval of Delta shareholders and the approval of the Kentucky Public Service Commission.
Delta serves 36,000 customers in 23 counties in Central and Southeastern Kentucky.
Peoples is the largest natural gas distribution company in Pennsylvania. It serves 700,000 homes and businesses in western Pennsylvania, West Virginia and Kentucky.