Charlotte-based Duke Energy has agreed to settle a shareholder lawsuit linked to its 2012 merger with Progress Energy for about $146 million.
Duke’s insurance coverage covers most of the settlement amount, and shareholders – not customers – will pay the remaining portion, according to a company statement. The company last year reported a $26 million reserve for the estimated portion not covered by insurance.
The class-action lawsuit brought by shareholders claimed Duke Energy, its executives and directors made misrepresentations related to a post-merger CEO change. The settlement covered three consolidated cases in the N.C. federal courts that were filed shortly after the July 2012 merger.
As part of the agreement, Duke and the named executives and directors denied the allegations and any wrongdoing.
Digital Access for only $0.99
For the most comprehensive local coverage, subscribe today.
Duke said it settled to “avoid the cost of prolonged litigation and eliminate uncertainty for the company” from the lawsuit.
When Duke and Progress agreed to the $32 billion “merger of equals,” Progress chief executive Bill Johnson was expected to lead the combined companies. Duke became the nation’s largest electric utility with 7.1 million customers in six states at the time.
But within hours of closing the deal, the new Duke board promptly fired Johnson and reinstalled Duke CEO Jim Rogers. Johnson is now chief executive of the Tennessee Valley Authority.
The N.C. Utilities Commission launched an investigation of whether the commission had been misled about the company’s leadership.
In testimony, Rogers and Duke directors depicted Johnson’s “autocratic” style as a poor fit for the job. Johnson testified that Duke had simply wanted to get out of the merger before it closed.
Under the settlement terms reached in late 2012, Rogers retired at the end of 2013, when his contract expired. Duke agreed to replace two other executives and added $25 million to the $650 million in merger savings it guaranteed Carolinas customers.
Duke also said it would maintain at least 1,000 employees in Raleigh, the former Progress headquarters, for at least five years.
Tuesday’s lawsuit agreement covers shareholders who bought Duke stock between June 11, 2012, leading up to the merger’s close, and July 9, 2012, the days after it closed. The class action includes former Progress shareholders who acquired Duke shares in the merger.
The settlement does not say how many shareholders are expected to benefit from the case.
Duke faces two more merger-related shareholder lawsuits in Delaware. Those are derivative class actions in which shareholders contend that directors failed to act in the company’s best interest.
Those cases are still working their way through the system, said Duke spokesman Dave Scanzoni.
A third shareholder derivative case claimed Johnson’s severance package of up to $44.7 million was excessive. That case was dismissed in N.C. Business Court last April.