By Tom Hals
Dec 3 (Reuters) - Pipeline operator El Paso received court
approval on Monday for a $110 million class-action settlement
with shareholders who alleged the $23 billion sale of the
company to Kinder Morgan Inc was riddled with conflicts of
The case may have a lasting impact on Wall Street dealmaking
by making advisers and bankers more sensitive to disclosing
conflicts of interest when arranging mergers and takeovers.
The settlement ended shareholder lawsuits that accused El
Paso's chief executive, Douglass Foshee, and deal adviser,
Goldman Sachs Group Inc, of having an interest in holding down
the purchase price.
Delaware Court of Chancery Judge Leo Strine called the
settlement a "substantial achievement" for shareholders.
In February, Strine "reluctantly" allowed a vote by El Paso
shareholders on the deal, which was approved with 95 percent of
El Paso shares voted in favor. The deal created the largest
natural gas pipeline operator in the United States.
Strine at the time called the behavior in deal negotiations
"disturbing," and he piled scorn on Goldman Sachs for its
eagerness to remain El Paso's adviser despite holding a 19
percent stake in Kinder Morgan.
As part of the settlement, Goldman Sachs gave up its $20
million advisory fee.
Strine's February opinion also put the spotlight on Foshee's
interest in leading a buyout of El Paso assets that were
unwanted by Kinder Morgan, something Foshee never disclosed to
Shareholders linked that interest to Foshee's negotiating
tactics, which included agreeing to cut an initial deal price of
$27.55 a share to the $26.87 price the companies went public
with in October 2011.
While Strine allowed the deal to move ahead, his February
opinion drew a line for dealmakers, and deal lawyers have been
more concerned with disclosing conflicts to avoid legal
"This was a very interesting case," Strine said on Monday.
"It started productive discussions in certain circles."
The settlement is among the five largest in the Court of
Chancery, a popular venue for shareholder lawsuits, according to
Stuart Grant, who represented shareholders in the case.
Four individual investors objected to the settlement for
varying reasons, including a claim it was inadequate. Strine
overruled those objections.
The case is El Paso Shareholder Litigation, Delaware Court
of Chancery, No. 6949.
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