The class action lawsuit was filed on behalf of all persons who held the common stock of TXU Corp. at the close of business on July 19, 2007, against defendants TXU and certain of its officers and directors, alleging violations under Section 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(a), and the rules and regulations of the Securities and Exchange Commission ("SEC") promulgated thereunder, in connection with the solicitation of proxies in favor of a proposed management-led $45 billion leveraged buy-out (the "LBO") of TXU to take it private at $69.25 cash per share to be accomplished by means of a proposed merger (the "Merger"). The action was filed in connection with a proposed settlement of the claims asserted herein and in related litigation pending in Texas state and federal courts.
The complaint alleges that the LBO and the Merger were negotiated and approved by the Board of Directors of TXU by means of a biased and flawed bidding process that did not represent the intrinsic value of the Company or its value going-forward premised on its ability to generate strong earnings and expand to meet growing energy demand in the southwest. The complaint further alleges that shareholder proxies in favor of the LBO and the Merger are being sought pursuant to a materially false and misleading proxy statement filed with the SEC on or about June 14, 2007. As alleged in detail in the complaint, the proxy statement is materially false and misleading in violation of Section 14(a) of the Exchange Act, 15 U.S.C. § 78n(a), and Rule 14a-9 promulgated by the SEC thereunder, in that, among other things, the proxy statement does not truthfully or adequately describe among other things (a) material background information regarding the transaction, (b) the Director Defendants' consideration of the transaction, (c) their efforts, if any, to obtain an alternate transaction or alternative strategic opportunity on terms more favorable to plaintiff and the Company's other public shareholders, (d) the financial analysis supporting the fairness of the transaction to TXU's public shareholders, and (e) the Director Defendants' consideration of or response to certain derivative litigation currently pending against them in the District Court of Dallas County, Texas, captioned In re TXU Corp. Derivative Litigation, No. 07-01779 (44th Judicial District).
On January 17, 2008, a Joint Motion for Preliminary Approval of Class Action Settlement and for Approval of Notice Plan was filed by the parties. According to the details in the Motion, on July 23, 2007, after engaging in good faith discussions and arm's-length negotiations with regard to the possible settlements of Schipper and In re TXU Corp. Derivative Litigation, Plaintiffs and the Settling Defendants reached an agreement in principle providing for the settlement of Schipper and the settlement of In re TXU Corp. Derivative Litigation. On July 25, 2007, TXU filed a definitive proxy statement which set September 7, 2007, as the date for the shareholder vote on the Merger Agreement and which included certain disclosures requested by Plaintiffs in the Settlement Letter (the "Definitive Proxy Statement"). On September 7, 2007, the shareholders of TXU approved the Merger. On October 10, 2007, the Merger was consummated. On January 7, 2008, the parties entered into the Settlement Agreement. The "Settlement Class" means a non-opt out class for settlement purposes of all holders of TXU common stock at any time from February 23, 2007, through and including October 10, 2007. According to the Terms of the Settlement, the Settling Defendants agreed to, and did, include in the Definitive Proxy Statement the certain disclosures requested in the Settlement Demand Letter. Further, the fee payable by TXU if it terminated the Merger Agreement was reduced from $1 billion to $925 million.
According to the Final Order and Judgment signed by U.S. District Judge Sam A. Lindsay on May 19, 2008, the court finds and concludes that the Federal Settlement is fair, reasonable and adequate and in the best interests of the Settlement Class. The court hereby approves the Federal Settlement and all transactions preliminary or incident thereto, as modified by its order, dated May 9, 2008. This action is hereby dismissed with prejudice.
On June 17, 2008, a Notice of Appeal was filed in the U.S. Court of Appeals for the Fifth Circuit by an objector to the settlement. In early November, the appellant filed a motion to dismiss the appeal and on November 17, 2008, the District Court entered the dismissal order from the Fifth Circuit.