Pirate Capital files lawsuit against Aquila board for alleged breach of fiduciary duties

By Lisa Kerner

Charlotte, N.C., April 16 - Aquila, Inc. investor Pirate Capital LLC filed a class action lawsuit against the company's board of directors on Monday alleging "breaches of fiduciary duties related to the process and structure of the proposed transaction with Great Plains Energy, Inc.," as well as conflicts of interest.

Pirate Capital has a copy of the complaint available at the Web site www.badaquiladeal.com. The site has received more than 15,000 hits within the first week, the company said.

Also on the Web site is Pirate's presentation relating to the Great Plains "sweetheart deal for control of Aquila" first announced on Feb. 7. The investor recommends that Aquila accept only the transaction with Black Hills Corp. and continue to operate as a standalone company.

The Great Plains deal calls for it to acquire all the outstanding shares of Aquila and its Missouri-based electric utility assets for $1.80 in cash plus 0.0856 of a share of Great Plains Energy common stock for each share of Aquila common stock. The transaction, valued at $4.54 per share or about $1.7 billion, includes the assumption of some $1 billion of Aquila's net debt.

Black Hills will acquire Aquila's electric utility in Colorado, its gas utilities in Colorado, Kansas, Nebraska and Iowa and its associated liabilities for $940 million in cash immediately prior to Great Plains Energy's acquisition of Aquila.

"We are very pleased with the level of support we have received thus far, and we will continue to work vigorously to ensure that this deal is voted down," Thomas R. Hudson, manager of Pirate Capital, said in a news release.

"A clear signal must be sent to management and the board. We strongly encourage all Aquila shareholders to vote against the deal in its current form and to withhold their votes for the directors who are up for re-election at Aquila's annual meeting" which is scheduled for May 2.

Pirate Capital, in a previous release, recommended that Aquila consummate the sale of its non-Missouri utility operations, deleverage in order to receive an investment-grade rating and form a holding company structure. The strategies could allow Aquila's shareholders to realize $5.00 to $5.50 per share, or a 25% premium to the merger consideration, according to Pirate Capital.

Great Plains Energy is a Kansas City, Mo., holding company for Kansas City Power & Light and Strategic Energy, LLC.

Black Hills is a diversified energy company based in Rapid City, S.D.

Based in Kansas City, Mo., Aquila owns electric power generation assets and operates electric and natural gas transmission and distribution networks.

Pirate Capital serves as the investment adviser to four hedge funds: Jolly Roger Fund LP, Jolly Roger Offshore Fund Ltd., Jolly Roger Activist Fund LP and Jolly Roger Activist Fund Ltd.

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