Updated 07/06/2012 09:34 PM
Duke Energy/Progress Energy merger under investigation after leader shakeup
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CHARLOTTE – There is new fallout from the the leadership shakeup following the merger between Duke Energy and Progress Energy.
In a letter to the editor in the Wall Street Journal, one of Progress Energy's former directors calls the change at the top of the combined company "one of the greatest corporate hijackings in U.S. business history."
John Mullin III wrote that the shakeup "can only be described as an incredible act of bad faith with regard to the undertakings of the merger agreement."
The unexpected move forced out Progress CEO Bill Johnson, who was to lead the new company and put Duke CEO Jim Rogers in charge. It runs contrary to the plan that the companies told regulators earlier in the year.
"Certainly from Raleigh's standpoint this has to create some additional discomfort about how much of a presence the combined company will have in the Raleigh area," said UNC Charlotte economics professor Peter Schwarz.
A spokesman for the state utilities commission said the body is looking into the shakeup and will decide soon whether and how it should respond.
Earlier this week, S&P Financial Services put Duke on a credit watch list. In a statement, a company analyst said:
The sudden shift in management raises concerns about effective corporate governance, successful handling of the anticipated merger integration, and the ongoing effective management of pending challenges that face the combined entity.
Analysts say the fallout could turn eyes toward Charlotte, partly because Rogers has a higher profile than Johnson.
"That's likely to put a lot of attention [in Charlotte]," said Schwarz.
Duke Energy will not comment on what led to Johnson's ouster. An agreement with the utilities commission requires shareholders, and not customers, to pay for severance packages connected to the merger, including up to $44.7 million for Johnson.
Statement by Attorney General Roy Cooper on Civil Investigative Demand to Duke Energy:
Despite our objection, Duke Energy said it needed a rate increase in order to protect its credit. Now this significant management change within hours after the merger has put the company on credit watch, so we need to get to the bottom of this to make sure we protect consumers.