WILMINGTON, Del., March 6 The
third-largest U.S. proxy adviser recommended that El Paso Corp
shareholders vote against a proposed $23 billion sale of
the company to Kinder Morgan Inc, switching its position
after comments made by a Delaware judge.
Egan-Jones Proxy Services said in a report that it was
withdrawing its endorsement of the deal because of "the
conflicts of interest cited by (Delaware Chancery Court judge
Leo Strine) and the attendant doubts cast on the deal."
A shareholder group sued in January to stop the deal,
arguing that El Paso adviser Goldman Sachs Group Inc and
El Paso Chief Executive Douglas Foshee had vested interests in
holding down the price for the company.
Goldman Sachs advised El Paso on the deal but also owns
a sizable stake in acquirer Kinder Morgan through its private
Judge Strine called the negotiating process
"disturbing" in a ruling last week, but refused to block the
acquisition, saying shareholders should decide for themselves if
they want to accept the deal.
The two largest proxy advisers in the U.S., Institutional
Shareholder Services Inc and Glass, Lewis & Co LLC, have
recommended that El Paso shareholders support the deal.
An ISS spokesman said on Monday that its recommendation
was unchanged, and didn't return calls on Tuesday.
Glass Lewis said it had not changed its recommendation.
"Our recommendation was arrived (at) after taking into
consideration all aspects of the deal, including the process,"
Glass Lewis Managing Director Warren Chen said in an emailed
statement. "While we were apprehensive about some aspects of the
process, ultimately, we believe the overall merits of the
transaction outweighed our concerns."
And w hile Strine's opinion has swayed some to vote
their proxies against the deal, El Paso said on
Monday 70 percent of the company's shares have been voted, with
98.5 percent supporting the deal. Those votes can be changed up
until the Friday deadline.
Egan-Jones is the smallest of the three main proxy advisory
El Paso shares closed down 1.5 percent at $28.07
and Kinder Morgan shares were down 2.4 percent at $35.35 on the
New York Stock Exchange.