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Securities Exchange Act Violation – Proxy Statement – Valuation Analysis

By: Derek Hawkins//November 10, 2021//

Securities Exchange Act Violation – Proxy Statement – Valuation Analysis

By: Derek Hawkins//November 10, 2021//

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7th Circuit Court of Appeals

Case Name: Michael Kuebler, et al., v. Vectren Corporation, et al.,

Case No.: 19-2973

Officials: SYKES, Chief Judge, and HAMILTON and ST. EVE, Circuit Judges.

Focus: Securities Exchange Act Violation – Proxy Statement – Valuation Analysis

This securities case arose from the 2018 merger between Vectren Corporation, an Indiana public utility and energy company, and CenterPoint Energy, Inc., a public utility holding company. CenterPoint eventually acquired all Vectren stock for $72.00 per share in cash. In the meantime, however, several Vectren shareholders filed this suit alleging violations of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78a et seq.

First, the shareholders tried to enjoin the shareholder vote on the merger. The district court denied that request. The shareholders then filed an amended complaint alleging that Vectren’s Proxy Statement was misleading in violation of Section 14(a) of the Exchange Act, § 78n(a). Plaintiffs argued that the Proxy Statement should have included two omitted financial metrics used by Vectren’s financial advisor in its analysis leading to its opinion that the merger terms were fair to Vectren shareholders. The first omitted metric, Unlevered Cash Flow Projections, forecast the gross after‐tax annual cash flow for Vectren between 2018 and 2027. The second omitted metric, Business Segment Projections, showed separate financial projections for each of Vectren’s three main business lines.

Without this information, the shareholders allege, they were unable to assess the fair value of their Vectren shares because they could not replicate the adviser’s valuation analysis. In other words, the shareholders believe that the adviser undervalued their Vectren shares, and they wanted to double‐ check its work. The district court granted Vectren’s motion to dismiss, finding that the shareholders had failed to allege adequately both materiality of the omissions and any resulting economic loss. We affirm.


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Derek A Hawkins is Corporate Counsel, at Salesforce.


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