A judge in Delaware’s Court of Chancery has indicated that he will rule by March 6 on a request by El Paso Corp. shareholders to block a vote on the company’s sale to Kinder Morgan Inc. (KMI).

That ruling is cutting it close, because March 6 also is the date that El Paso shareholders are to hold a special meeting to vote on KMI’s proposed $21.1 billion buyout of El Paso.

El Paso shareholders filed the lawsuit challenging the merger in October, saying that investment banker Goldman Sachs, which is an adviser to both El Paso and KMI, had a conflict of interest (see Daily GPI, Oct. 18, 2011). At the time of the merger announcement, Goldman also was advising El Paso about a proposed spin-off of the company’s exploration and production business (see Daily GPI, May 25, 2011).

“The entire process by which the [El Paso] board decided El Paso’s future was inherently tainted because of the board’s reliance on conflicted advisers and management. Goldman, the company’s long-time financial adviser, could not provide impartial advice about [El Paso’s] strategic alternatives due to the bank’s $4 billion (19%) ownership in KMI, yet the board allowed Goldman to play a pivotal role in the process,” stated Bernstein Litowitz Berger & Grossmann LLP, one of several law firms representing El Paso shareholders in the class-action lawsuit.

A spokesman for El Paso declined to comment on the active litigation. However in its Form 10-Q report for the third quarter filed with the Securities and Exchange Committee, El Paso said “We believe these purported shareholder class actions are without merit and we intend to defend against them vigorously.” Another class action lawsuit has been brought in state district court in Harris County, TX, the company said.

Delaware Chancery Court Judge Leo Stine expressed some concern about the apparent conflicts at a hearing last week, but he didn’t seem to favor blocking the shareholder vote on March, according to press accounts.

“I’m not going to give predictions on what the court will do,” said an attorney representing the El Paso class.

The transaction, if adopted by shareholders and not blocked in the courts, would make the combined companies the largest owner and operator of gas pipelines and storage assets in North America, with 67,000 miles of gas transportation pipelines and connections to the Eagle Ford, Marcellus, Utica, Haynesville, Fayetteville and Barnett shales. It also would be the largest provider of contracted natural gas treating services and have significant midstream gathering assets.

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