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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_________________
FORM 8-K
_________________
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 10, 1999
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AQUARION COMPANY
(Exact Name of Registrant as Specified in its Charter)
Delaware 06-0852232
(State or Other Jurisdiction of 1-8060 (I.R.S. Employer
Incorporation or Organization) (Commission Identification No.)
File Number)
835 Main Street 203-335-2333
Bridgeport, Connecticut 06604 (Registrant's Telephone
(Address of Principal Executive Number, Including Area
Offices) Code)
NOT APPLICABLE
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(For Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On September 10, 1999, a complaint relating to the pending merger of
Aquarion Company ("Aquarion") with Kelda Group plc (formerly Yorkshire Water
plc), was filed by Herbert E. Behrens in the Court of Chancery of the State of
Delaware naming Aquarion and its directors as defendants. The complaint is
filed herewith as Exhibit 99(a). On September 13, 1999, Aquarion issued a press
release, which is filed herewith as Exhibit 99(b).
The complaint requests that the merger be enjoined preliminarily and
permanently, the transaction be rescinded and rescissory damages be awarded to
the extent that the merger is consummated prior to the entry of the Court of
Chancery's final judgement, the defendants be directed to account to the
plaintiff and all other members of the class for all the damages caused to them,
the plaintiff be awarded the costs and disbursements of the action including a
reasonable allowance for the fees and expenses of plaintiff's attorneys and
experts and the plaintiff and other members of the class be granted such other
relief as may be just and proper.
The complaint generally alleges flaws in the auction process. It also
alleges that the Aquarion Board of Directors was required to extend the auction
process by making an additional inquiry of one of the final bidders as to
whether that bidder would further raise its offer. It also suggests that Kelda
was tipped by the defendants or their agents as to the amount of the competing
bid.
Aquarion and its directors believe that the complaint is wholly without
merit and intend to vigorously defend the action.
No application for temporary or preliminary relief has been sought and
Aquarion expects that its shareholder meeting to vote on the merger called for
9:30 a.m. on September 21, 1999 at People's Bank, 850 Main Street, will proceed
as scheduled.
Item 7. Exhibits
99(a) Class Action complaint filed in the Court of Chancery of the State of
Delaware in and for New Castle County by Herbert E. Behrens against
Aquarion Company, George W. Edwards, Jr., Richard K. Schmidt, Janet D.
Greenwood, John A. Urquhart, G. Jackson Ratcliffe, Geoffrey
Etherington, Edgar G. Hotard, and Jack E. McGregor and
99(b) Press Release dated September 13, 1999.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 13, 1999
AQUARION COMPANY
(Registrant)
By:/s/ Janet M. Hansen
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Janet M. Hansen
Vice President, Chief
Financial Officer and Treasurer
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EXHIBIT LIST
99(a) Class Action complaint filed in the Court of Chancery of the State of
Delaware in and for New Castle County by Herbert E. Behrens against
Aquarion Company. George W. Edwards, Jr., Richard K. Schmidt, Janet
D. Greenwood, John A. Urquhart, G. Jackson Ratcliffe, Geoffrey
Etherington, Edgar G. Hotard, and Jack E. McGregor and
99(b) Press Release dated September 13, 1999.
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EXHIBIT 99(a)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
HERBERT E. BEHRENS, C.A. No. 17416NC
Plaintiff,
-against-
AQUARION COMPANY, GEORGE W. EDWARDS, JR., RICHARD K. SCHMIDT,
JANET D. GREENWOOD, JOHN A. URQUHART, G. JACKSON RATCLIFFE,
GEOFFREY ETHERINGTON, EDGAR G. HOTARD, and JACK E. McGREGOR,
Defendants.
CLASS ACTION COMPLAINT
----------------------
Plaintiff, by his attorneys, alleges upon information and belief,
except as to paragraph 1 which plaintiff alleges upon knowledge, as follows:
THE PARTIES
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1. Plaintiff Herbert Behrens is and was at all times relevant to this
action a shareholder of Aquarion Company ("Aquarion" or the Company").
2. Aquarion is a Delaware corporation, with principal offices located
at 835 Main Street, Bridgeport, Connecticut. Aquarion is a holding company whose
subsidiaries are engaged in the regulated utility business of public water
supply and various non-utility businesses, including contract management of
municipal water systems and ownership of a timber processing company.
3. Defendant George W. Edwards, Jr., ("Edwards") is and was at all
times relevant to this action Chairman of the Board of the Company.
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4. Defendant Richard K. Schmidt ("Schmidt") is and was at all times
relevant to this action President and Chief Executive Officer of the Company.
5. Defendants Janet D. Greenwood, John A. Urquhart, G. Jackson
Ratcliffe, Geoffrey Etherington, Edgar G. Hotard, and Jack E. McGregor are and
were at all times relevant to this action members of the Board of Directors of
the Company.
6. Non party Kelda Group plc (formerly known as Yorkshire Water plc)
is a public limited company organized under the laws of England and Wales. It
was incorporated in 1989, as part of the process of privatization of the United
Kingdom water industry, as the holding company of Yorkshire Water Services
Limited.
7. The individual defendants (hereinafter, the "Individual
Defendants"), have a fiduciary relationship and responsibility to plaintiff and
the other shareholders of the Company and owe them the highest obligations of
good faith, loyalty, fair dealing, due care and candor.
CLASS ACTION ALLEGATIONS
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8. Plaintiff brings this action pursuant to Rule 23 of the Rules
of the Court of Chancery on behalf of himself and all other shareholders of the
Company (except defendants and any person, firm, trust, corporation, or other
entity related to or affiliated with any defendant), who are or will be
adversely affected by the conduct of the defendants as more fully described
herein (the "Class").
9. This action is properly maintainable as a class action for the
following reasons:
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(a) The Class is so numerous that joinder of all members is
impracticable. Aquarion has approximately 11.4 million shares of common stock
outstanding owned by hundreds of record shareholders and many more beneficial
holders;
(b) There are questions of law and fact which are common to the
Class and which predominate over questions affecting any individual Class
member. The common questions include, inter alia, the following:
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(1) whether defendants have breached their fiduciary duties
owed to plaintiff and members of the class by their conduct complained of
herein;
(2) whether defendants have breached their fiduciary
obligations to plaintiff and members of the class by failing to maximize
shareholder value; and
(3) whether plaintiff and the other members of the Class
will be irreparably damaged by defendants' wrongful conduct complained of herein
and if so, what is the proper remedy and/or measure of damages.
(c) The claims of plaintiff are typical of the claims of the
Class in that all members of the Class will be damaged alike by defendants'
actions.
(d) Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of the Class.
(e) The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class.
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(f) Defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief and/or
corresponding declaratory relief with respect to the Class as a whole.
CLAIM FOR RELIEF
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10. On or about June 1, 1999, defendants announced that Aquarion and
Kelda Group plc (formerly known as Yorkshire Water plc) had entered into an
Agreement and Plan of Merger, dated as of May 31, 1999 (the "Merger Agreement").
Pursuant to the terms of the Merger Agreement, the outstanding shares of
Aquarion common stock will be converted into the right to receive $37.05 per
share in cash, without interest. As a result of the Merger, Aquarion will become
an indirect wholly-owned subsidiary of Kelda. The proposed transaction is
subject to approval by the Company's shareholders.
11. As alleged below, defendants breached their duty of loyalty to
plaintiff and the Class by virtue of their failure to obtain the highest
possible price for the Company in the auction process and by pursuing a tainted
auction process.
Background Of The Merger
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12. As set forth in the Proxy Statement filed on or about August 20,
1999, from time to time Aquarion has received unsolicited inquiries from other
companies in the industry regarding the possibility of an acquisition of, or
alternative strategic combinations with, Aquarion.
13. At a meeting of the Aquarion Board in December 1998, the
Individual Defendants determined to reevaluate Aquarion's strategic posture and,
in connection
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therewith, defendants determined to engage a financial advisor to assist the
Board in making this evaluation. Toward that end, Morgan Stanley & Co. was
retained in or about January 1999.
14. In February 1999, the Aquarion Board adopted Morgan Stanley's
recommendation of a targeted auction process to develop indications of value for
Aquarion as part of its strategic review. The targeted auction process
contemplated a two-step process involving, first, the solicitation by Aquarion
of non-binding statements of interest and, thereafter, if Aquarion's Board
authorized the second step of the process, invitations to selected potential
bidders to perform intensive due diligence and to submit final binding
proposals. The Proxy Statement is silent with regard to the process or rules, if
any, imposed by Morgan Stanley & Co. or Aquarion in the auction process.
15. In early March 1999, 11 of 13 potential acquirors (including
Kelda) identified by the Company and Morgan Stanley entered into confidentiality
agreements with Aquarion and received a Confidential Offering Memorandum.
16. On April 15, 1999, nine companies (including Kelda) submitted
non-binding proposals, including preliminary indications of interest. The ranges
of these indications of interest and proposals exceeded the values suggested by
the Company's existing strategic plans. The Proxy Statement is silent with
regard to the range of prices contained in the various proposals.
17. At its April 20, 1999 meeting, the Aquarion Board authorized
management to proceed with the second phase of the bidding process. The Board
authorized defendant Schmidt to meet with the five companies that had submitted
the
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highest bids and with another company that increased its bid following its
initial submission to be among the highest bids. The Proxy Statement is silent
with regard to the identity of this sixth company or the circumstances of its
bid increasing following an initial submission.
18. On May 21, 1999, five of the six companies submitted final
binding bids for Aquarion, including their markups of the forms of merger
agreements proposed by Aquarion. Of the five bids, three contemplated cash
mergers. Kelda's final binding proposal proportedly provided the highest value,
$36.70 per Aquarion share in cash. The Proxy Statement is silent as to the
range of the bids submitted or the extent to which the Kelda bid exceeded the
other four bids submitted in the second phase. Apparently, no effort was made
by Morgan Stanley or Aquarion to determine whether any bidder other than Kelda
was prepared to bid in excess of $36.70 in cash.
19. Following receipt of these bids, the Aquarion Board, at a special
meeting held on May 25, 1999, directed its counsel to meet with Kelda and its
counsel and to negotiate a form of merger agreement. No effort was made at that
juncture to determine whether the other bidders would increase their bid for the
Company nor, according to the Proxy Statement, was that subject discussed at the
May 25, 1999 Board meeting.
20. Over the next three days (from May 26-28), negotiations ensued
between the Company and Kelda regarding the terms of the merger agreement in
anticipation of an Aquarion special Board meeting expected to be called for
Memorial Day, May 31, 1999.
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21. Early on Friday, May 28, 1999, representatives of another one of
the five bidders that had submitted bids on May 21, 1999 (identified in the
Proxy Statement only as "Bidder Two"), contacted Morgan Stanley on an
unsolicited basis. Bidder Two's representatives advised Morgan Stanley that
Bidder Two was prepared to increase its bid to $37.00 per share in cash. Bidder
Two's bid also contemplated the payment to shareholders of a pro rata dividend
up to the date of closing. The Proxy Statement is silent as to the amount of
such pro rata dividend. The annual dividend previously paid to Aquarion's
shareholders was $0.2775.
22. Bidder Two was told that its proposal, although higher and better
than the Kelda offer, would not be considered unless a new final binding bid in
writing and a revised form of merger agreement were delivered to Aquarion by
5:00 p.m. that same day.
23. That same morning, Kelda was informed, (according to the Proxy
Statement, "without any further specific information"), that Aquarion had
received "new information" to which it might be legally obligated to respond.
24. Shortly after 5:00 p.m. on Friday, May 28, 1999, Bidder Two
delivered its $37 bid to Morgan Stanley with a revised and signed form of merger
agreement. Negotiations ensued over the terms of the merger agreement which
negotiations ended on Sunday, May 30, 1999. Bidder Two's offer was scheduled to
be reviewed at a special Board meeting tentatively called for May 31, 1999.
25. The following morning, May 31, 1999, Morgan Stanley called each
of Kelda and Bidder Two to advise them that Aquarion's Board would be meeting
beginning
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at 9:00 p.m. that evening to determine an appropriate course of action. The
Proxy Statement is silent with regard to the content of the conversations
between representatives of Morgan Stanley and Kelda. Moreover, the Proxy
Statement does not disclose any other contacts between any other representatives
of Kelda and Aquarion.
26. Shortly before the commencement of the May 31, 1999 special Board
meeting, Kelda contacted Morgan Stanley with an increased bid price of $37.05
per share, a $0.35 per share increase over Kelda's prior bid and just $0.05 per
share over Bidder Two's bid. All other terms of Kelda's definitive form of
agreement remained unchanged.
27. The May 31, 1999 special Board meeting commenced shortly after
9:00 p.m. The Board was advised that Morgan Stanley was prepared to issue its
fairness opinion with respect to either bid. The Board meeting ended with the
approval of the Kelda bid. The Merger Agreement was announced the following
morning.
28. Prior to accepting the Kelda offer, no effort was made by the
Aquarion Board of its representatives to determine whether Bidder Two was
willing to raise its offer.
29. Kelda raised its offer so that it exceeded Bidder Two's bid by a
mere five cents per share enabling defendants and their financial advisor to
pronounce that the two cash bids were roughly equivalent and enabling defendants
to embrace the Kelda offer. Kelda could not have raised its bid so late in the
bidding process and by just enough to meet Bidder Two's increased bid unless it
was tipped by defendants or their agents as to the amount of Bidder Two's bid.
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30. Such action by defendants tainted the auction process (that was
already flawed by defendants' apparent lack of interest in encouraging bidders
to compete with one another) and constituted a breach of defendants' duty to
maximize value in a sale of the Company.
31. Defendants have failed and refused to take those steps necessary
to ensure that Aquarion's shareholders will receive maximum value for their
shares. Defendants failed to institute auction or bidding procedures best
calculated to maximize shareholder value.
32. As a result of the actions of defendants, plaintiff and the other
members of the Class have been and will be damaged in that they have not and
will not receive their fair proportion of the value of Aquarion's assets and
businesses and/or have been and will be prevented from maximizing the value of
their investment in Aquarion.
33. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
(a) declaring this action to be a class action and certifying
plaintiff as class representative;
(b) enjoining, preliminarily and permanently, the proposed
transaction complained of herein;
(c) to the extent, if any, that the transaction or transactions
complained of are consummated prior to the entry of this
Court's final judgment, rescinding such transaction or
transactions, or awarding the class rescissory damages;
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(d) directing that defendants account to plaintiff and the other
members of the class for all damages caused to them;
(e) awarding plaintiff the costs and disbursements of this action,
including a reasonable allowance for the fees and expenses of
plaintiff's attorneys and experts; and
(f) granting plaintiff and the other members of the class such
other and further relief as may be just and proper.
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/ [SIGNATURE ILLEGIBLE]
__________________________________________
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
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ABBEY, GARDY & SQUITIERI, LLP
212 East 39/th/ Street
New York, New York 10016
(212) 889-3700
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Exhibit 99(b)
CONTACT:
Larry L. Bingaman
(203) 336-7626
Plaintiff Class Action Filed Regarding Aquarion Merger
BRIDGEPORT, CT, Sept. 13, 1999 - Aquarion Company (NYSE:WTR) announced today
that a purported class action complaint relating to the company's proposed
merger with Kelda Group plc (formerly Yorkshire Water plc) was filed in Delaware
Chancery Court late in the afternoon on September 10, 1999. The action was
brought by Herbert E. Behrens, names Aquarion and its directors as defendants,
and requests, if Aquarion's pending merger with Kelda is consummated, recission
or the awarding of recissory damages along with the costs and fees and expenses
of plaintiff's attorneys and experts.
While the complaint also requests injunctive relief, no application for
temporary or preliminary relief has been sought and Aquarion expects that its
shareholder meeting to vote on the merger, called for 9:30 a.m. on September
21, 1999, at People's Bank, 850 Main Street, will proceed as scheduled.
The complaint generally alleges flaws in the auction process. Aquarion and
its directors believe that the complaint is wholly without merit and intend to
vigorously fight the claim. The filing of the complaint will not affect the
timing of the completion of the merger.
The Boards of Directors of Aquarion and Kelda of Leeds, England, on June 1,
jointly announced that they had approved an agreement for Kelda to acquire all
of the outstanding shares of Aquarion Company for $37.05 per share. As a result,
Aquarion will be merged with a subsidiary of Kelda.
Aquarion Company's principal business is public water supply. Through its
BHC and Sea Cliff Water Company subsidiaries, it is one of the 10 largest
investor-owned water utilities in the U.S. and serves 141,000 customers, or a
population of more than 500,000, in 30 Connecticut and Long Island, NY
communities. Other businesses include real estate through the sale of surplus
water company land, and contact management of municipal water systems. Aquarion
also owns a timber processing company.
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