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Wednesday, 07/10/2019 10:46:34 PM

Wednesday, July 10, 2019 10:46:34 PM

Post# of 114
Boardwalk Pipeline Buyout Suit Should Stand, Chancery Told
By Rose Krebs

Law360, Wilmington (July 10, 2019, 8:28 PM EDT) -- There is enough information to "reasonably" infer that Boardwalk Pipeline Partners LP's $1.5 billion public-unit buyout last year by its general partner was unfair to minority unitholders, and a suit challenging the transaction should proceed, a Delaware vice chancellor was told Wednesday.

During a hearing in Wilmington, hedge fund Bandera Master Fund LP and affiliated funds told Vice Chancellor J. Travis Laster that a proposed class action seeking damages on behalf of minority unitholders they contend were shortchanged per the transaction should survive a motion to dismiss filed by Boardwalk.

Bandera contends that public disclosures leading up to the buyout were purposely intended to drive down the price of units before they were purchased by Boardwalk's controlling general partner under a provision set forth in a master limited partnership agreement.

Last April, Loews Corp., which has a controlling stake in Boardwalk's general partner, disclosed that a Federal Energy Regulatory Commission announcement limiting pipeline owners' ability to recover tax expenses via adjustments in customer cost-of-service rates could trigger a general partner right to call in, or purchase, all outstanding public units.

Bandera's attorney, A. Thompson Bayliss of Abrams & Bayliss LLP, told the vice chancellor a series of sometimes "strange" disclosures were made last year leading up to exercise of the call right. A "deliberate" effort was made to drive down the stock price for Loews' benefit and to the detriment of minority unitholders, Bandera contends.

"The purpose of defendants' disclosures was clear: by threatening to exercise the option in the near term and at some uncertain price, the general partner and its controllers and affiliates sent Boardwalk's market price into immediate freefall," Bandera claimed in its complaint. "This sharp drop in Boardwalk's market price uniquely benefitted defendants at the expense of Boardwalk's minority unitholders."

Boardwalk's attorney, Lawrence Portnoy of Davis Polk & Wardwell LLP, disagreed with any assertion that disclosures or any comments made that the units may be called in were "suspicious" or that they were made in breach of the partnership agreement.

The call-in of public units was handled properly and Bandera has failed to prove its assertion that there was any contractual or fiduciary duty breaches associated with the transaction, Portnoy countered.

"All of these claims fail as a matter of law," Portnoy argued.

In September, Vice Chancellor Laster rejected a class settlement reached between Boardwalk and two shareholders who previously filed suit, ruling that public investors got too little from the proposed deal. The then-class attorneys went for the settlement without fully investigating the harm or damages, the vice chancellor said.

A substitute complaint was filed in February with Bandera asserting various claims against Boardwalk and arguing that the $12.06 per common unit — for a total of roughly $1.5 billion — paid by the general partner to buy the outstanding units was far less than fair value.

"As a result of defendants' contractual breaches and deliberate, disloyal actions, plaintiffs and the class have been deprived of their significant investment in Boardwalk for an artificially low purchase price that defendants themselves engineered," the suit asserted.

Vice Chancellor Laster said he would take the matter under advisement and render a decision on the motion to dismiss at a later date.

Bandera and its affiliated funds are represented by A. Thompson Bayliss, J. Peter Shindel and Daniel G. Paterno of Abrams & Bayliss LLP.

Boardwalk and its affiliates and Loews Corp. are represented by Srinivas M. Raju, Blake Rohrbacher and Matthew D. Perri of Richards Layton & Finger PA, Lawrence Portnoy, Charles S. Duggan and Gina Cora of Davis Polk & Wardwell LLP, Rolin P. Bissell of Young Conaway Stargatt & Taylor LLP, and Stephen P. Lamb, Andrew G. Gordon and Daniel A. Mason of Paul Weiss Rifkind Wharton & Garrison LLP.

The case is Bandera Master Fund LP et al. v. Boardwalk Pipeline Partners LP et al., case number 2018-0372, in the Court of Chancery of the State of Delaware.

--Additional reporting by Vince Sullivan and Jeff Montgomery. Editing by Jack Karp.

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