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UPDATE 1-Investor fund seeks probe of Shaw chairman on CB&I sale
September 25, 2012 / 6:10 PM / in 5 years

UPDATE 1-Investor fund seeks probe of Shaw chairman on CB&I sale

* Denali funds questions Shaw chairman’s political ambition

* Shaw questions whether Denali fund is a shareholder

* Denali says owns 1.1 pct of Shaw

Sept 25 (Reuters) - An investor fund that says it owns shares in Shaw Group Inc has asked for a special committee to investigate Shaw’s chairman for potential conflicts of interest as he looks to sell the U.S. engineering company to Chicago Bridge & Iron Co.

Denali Investors LLC, which previously called the $3 billion offer for CB&I undervalued, in a letter to independent directors said Shaw’s chairman and chief executive, James Bernhard, seemed to want to close the deal early next year to allow him to run for the U.S. Senate or for governor of Louisiana, where Shaw is based.

“We believe this helps explain why the current deal discussions began in May 2012 and was timed to close in the first half of 2013, given any Senate candidate cannot afford to wait beyond 2013,” New York-based Denali said in the letter, which was dated Sept. 18 and made public late on Monday.

If Shaw’s directors allowed the sale to go ahead in its current form, Denali said, “You are effectively rubber-stamping a massive and unwarranted transfer of value of approximately $1 billion to CB&I that belongs to Shaw shareholders.”

Shaw responded by reiterating the 72 percent premium offered by the $46 per share offer from CB&I, based on the stock’s closing price the previous trading day in late July.

“This letter is written by one small investor who claims to be a Shaw shareholder. We have been unable to substantiate that this investor owns any shares,” Shaw said in a statement.

H. Kevin Byun, who signed the letter from Denali, told Reuters that the fund holds 1.1 percent of Shaw through a number of different brokers.

Denali also criticized Shaw’s management for not discussing the deal or the process with investors on a conference call. CB&I announced the cash and stock deal on July 30.

Shaw shares, which have been creeping up toward to the proposed buyout price amid some analysts’ doubts about whether it will go through, were down 0.5 percent at $43.67 in afternoon trading on the New York Stock Exchange.

In mid-August, Denali had written a letter to Shaw’s board saying the stock could have reached $50 to $70 in 2013.

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