American Electric Power Company, Inc. (NASDAQ:AEP), a provider of electric services, announced today that it has reached a settlement regarding derivative actions filed by four shareholders between January and April 2021. These actions were related to allegations surrounding House Bill 6 (HB 6) and were consolidated under the title In re AEP Stockholder Derivative Litigation.
The derivative actions accused certain AEP officers and directors of breach of fiduciary duty, waste of corporate assets, unjust enrichment, insider trading, and violations of sections 10(b) and 21D of the Securities Exchange Act of 1934. The shareholders sought monetary damages and changes to AEP's corporate governance and internal policies.
In April 2023, AEP received a litigation demand letter from a shareholder who had previously filed an action in New York and attempted to intervene in the Ohio federal court cases. The letter, addressed to the AEP Board, echoed the allegations in the derivative actions and called for an independent investigation and legal action against certain current and former directors and officers.
In response, the AEP Board formed a committee to investigate and review the demand. Following the committee's recommendation, AEP agreed to a settlement in April 2024 to fully resolve the derivative actions and the litigation demand. On July 10, 2024, the settlement received preliminary approval from the court.
The settlement, subject to final court approval, includes a $450,000 payment for attorneys' fees and the implementation of certain corporate governance reforms, many of which AEP has already instituted. The settlement does not constitute an admission of liability by AEP.
If the court does not approve the settlement, or if the derivative actions and litigation demand are not otherwise settled or dismissed, the defendants will continue to defend against the claims, and the AEP Board will take appropriate actions in response to the litigation demand.
The terms of the settlement are detailed in the Notice of Proposed Settlement of Stockholder Derivative Litigation, which can be found on AEP's website. This notice is also attached as Exhibit 99.1 to the Current Report on Form 8-K, which was filed to inform stockholders of the settlement as required by the settlement terms and the court's preliminary approval order. The information provided in this article is based on a press release statement.
In other recent news, American Electric Power (AEP) has seen significant developments. The utility company issued $1 billion in junior subordinated debentures, consisting of two series, $400 million of 7.050% Series A and $600 million of 6.950% Series B, both due in 2054. The transaction was conducted through an underwriting agreement with a syndicate led by several major financial institutions. AEP also sold its Distribution Resources business to Basalt Infrastructure Partners, a move expected to yield approximately $315 million after taxes and fees. Concurrently, the company decided to retain its Retail business, AEP Energy. Analyst activity surrounding AEP has been mixed. Ladenburg Thalmann upgraded AEP's stock from Sell to Neutral, while UBS Securities downgraded it from Neutral to Sell. BMO Capital Markets projects AEP's earnings per share (EPS) to be $5.59 for 2024, $5.97 for 2025, and $6.35 for 2026, aligning with AEP's reaffirmed 2024 operating earnings guidance of $5.53 to $5.73 per share. These are some of the recent developments in AEP's business landscape.
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