Louisiana Pension Sues NYSE, Says Proposed Deal 'Won't Offer Fair Price'

In an effort to stop a planned $9.53 billion sale to Deutsche Boerse AG, the Louisiana Municipal Police Employees’ Retirement System has sued NYSE Euronext.

(February 28, 2011) — The Louisiana Municipal Police Employees’ Retirement System has sued NYSE Euronext, the parent company of the New York Stock Exchange, saying that the proposed deal won’t offer a fair price to NYSE’s public shareholders.

The suit stems from an effort to thwart a planned $9.53 billion sale to Deutsche Boerse AG, which would create the largest owner of equities and derivatives markets, Bloomberg reported. “In light of defendants’ breach of their fiduciary duties in agreeing to an unreasonably low price for the sale of the NYSE and agreeing to unreasonable and draconian deal protections,” shareholders are “entitled to enjoin the proposed transaction or, alternatively, to recover damages in the event the proposed transaction is consummated,” according to the complaint obtained by the news agency.

The case, which also includes Deutsche Boerse and the NYSE’s board as defendants, is Louisiana Municipal Police Employees’ Retirement System v. NYSE Euronext, New York State Supreme Court.

Separately, the Louisiana Municipal Police Employees´ Retirement System, along with other investors, has aggressively pushed for reforms in the way BP operates. The fund claimed that officers and directors of BP ignored “red flags” that could have prevented the massive oil spill in the Gulf of Mexico. The Louisiana fund said it is seeking reforms in BP management. Initially, the Louisiana pension filed the derivative lawsuit against BP in May, within weeks of the explosion, and the fund was soon joined by similar investor claims.

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To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

California Agency Calls State's Pensions 'Dangerously Underfunded,' Suggests DB-DC Hybrid Solution

California’s Little Hoover Commission, an independent state agency created to develop recommendations to control state and local government pension costs, found that the 10 largest pension funds faced a combined unfunded liability of $240 billion in 2010.

(February 28, 2011) — A new report issued by California’s Little Hoover Commission has recommended that California’s public pension plans should switch to a hybrid model with elements of a defined benefit plan and a defined contribution plan.

Hoover’s report explained that California’s pension plans are “dangerously underfunded.” The causes, they outline, are overly generous benefit promises, wishful thinking and an unwillingness to plan prudently. “Unless aggressive reforms are implemented now, the problem will get far worse, forcing counties and cities to severely reduce services and layoff employees to meet pension obligations,” the commission stated.

In the commission’s study of public pensions, the finding showed that the state’s 10 largest pension funds – encompassing 90% of all public employees – are overextended in their promises to current workers and retirees. To combat growing liabilities, the commission recommended that a hybrid model, which combines a lower defined-benefit pension with an employer-matched defined-contribution plan, is a model that must be made available to public agencies. According to the report, California must collapse unsustainable pension formulas and create a lower defined-benefit formula to facilitate this approach. Furthermore, the report suggested that a cap should be put in place on the maximum salary that can be used to determine pension payments, or on the maximum pension that an employee can earn, protecting pensions for lower-wage earners.

“California’s pension system – a conglomeration of 85 defined-benefit pension plans – demands more uniformity and oversight,” according to the report.

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In response to the report, the $226.5 billion California Public Employees’ Retirement System (CalPERS) issued a statement saying: “Pensions play an important role in the overall compensation of public employees today and have for nearly 80 years, and any change must honor the promises made to all public servants…CalPERS has earned a 7.9% return over the last 20 years above our assumed rate of return and we have gained more than $70 billion back since the financial crisis. We look forward to engaging with the decision-makers who must rely on all the facts when confronting these important issues and recommendations.”

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742