Noble Energy investor sues over ‘misleading’ info on Chevron merger deal
New York federal court asked to postpone vote until shareholders given access to documents. Plaintiff: Unfair terms will see Noble directors getting rich, investors poorly paid
Sue Surkes is The Times of Israel's environment reporter
An investor in Noble Energy has sued the company and nine of its directors in a New York federal court for allegedly filing a “materially incomplete and misleading” registration statement with the US Securities and Exchange Commission in a bid to persuade shareholders to approve a merger with Chevron Corporation.
The Houston, Texas-based oil and gas explorer has stakes in Israel’s mammoth gas fields Tamar and Leviathan through Nobel Energy Mediterranean Ltd.
In July, Chevron announced that it had entered into a definitive agreement with Noble Energy to buy all outstanding shares in an all-stock transaction valued at $5 billion, or $10.38 per share.
Energy Minister Yuval Steinitz welcomed Chevron’s entry into the Israeli market, while others pointed to its checkered environmental record.
Now, investor David Walsh is demanding the shareholders’ vote on the transaction be postponed until more information has been provided.
He charges in court documents that while Chevron investors stand to benefit and Noble Energy directors are set to make tens of millions of dollars out of the deal, payouts for common Noble Energy shareholders will be unfairly low.
The proposed deal provides for Noble Energy’s shareholders to get 0.1191 Chevron shares for each Noble Energy share, along with a three percent stake in the new, combined company that will result from the merger of Noble Energy with Chevron subsidiary, Chelsea Merger Sub Inc.
Walsh claims that Noble Energy’s registration statement lacks financial projections made by management, valuation analyses carried out on its behalf by J.P. Morgan Securities and details about non-disclosure (confidentiality) agreements entered into by other interested parties.
“Unlike poker, where a player must conceal his unexposed cards, the object of a
Registration Statement is to put all one’s cards on the table face-up. In this case only some of the cards were exposed—the others were concealed,” the court documents say.
Walsh, who demands a trial by jury, maintains that it was unfair to base the company’s stock value on trading figures as they were in the immediate run-up to the deal, given market volatility during the coronavirus pandemic.
He asserts that Noble Energy’s directors “stand to be richly compensated,” claiming in the court submission that “Defendants have been promised a vast array of particularly lucrative deal devices such as golden parachutes, severance packages, employment agreements, accelerated vesting of options, and other indemnification and considerations.
“The Company even agreed to a $40 million ‘integration pool’ to ‘award’ executives at the company, with Defendant Stover [David Stover, Noble Energy’s chairman and chief executive] standing to receive nearly $5 million from this pool, a benefit not shared with the minority stockholders who will be receiving unfair consideration.”
Walsh adds, “Piggybacking off the uncertainty of the pandemic, the Proposed Transaction may inordinately compensate Chevron shareholders and reward the Individual Defendants, all at the expense of the Company’s common stockholders.”
The case is called Walsh v. Noble Energy Inc. et al., case number 1:20-cv-06451, and it has been filed with the US District Court for the Southern District of New York.
Asked to comment, Chevron declined and Noble Energy failed to respond.
In other news, Norway’s biggest private money manager, Storebrand Asset Management, has sold its shares in Chevron and a list of other mainly oil and gas companies under its new climate change policy.
Jan Erik Saugestad, chief executive of the company, was quoted by the Wall Street Journal as saying, “Companies that don’t recognize climate risk or do not seize those opportunities are, in our mind, less attractive.”
