Former Indiana utility executive Jim Rogers finds himself at the center of the storm as North Carolina officials investigate an unexpected change in succession plans at Charlotte-based Duke Energy Corp. following its $17.8 billion takeover of Progress Energy Inc.
Duke announced on July 3 that Bill Johnson, the chairman and CEO of Progress, had resigned and wouldn’t take over as president and CEO of the combined companies as planned. Rogers, Duke's chairman and CEO, who was supposed to be chairman after the merger, was asked by the board to continue as CEO.
Three former board members of Raleigh, N.C.-based Progress said they would have voted against the takeover had they known that Duke’s CEO would remain in charge of the combined companies.
“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,” North Carolina Attorney General Roy Cooper said in an e-maile announcing the launch of his investigation.
“I wouldn’t have voted for the deal,” James Bostic Jr., who served on Progress’s board since 2002, said in a phone interview. “It was the board’s belief that that Bill Johnson would be able to run the combined companies in a more efficient manner and offer a much stronger return to shareholders.”
Rogers, 64, has a history of coming out on top in mergers. He was CEO of Plainfield, Ind.-based PSI Resources Inc. when it was acquired in 1994 and went on to become CEO of the merged company, Cincinnati-based Cinergy Corp.
Standard & Poor’s put Duke, the largest U.S. utility owner by market value, on negative credit watch after “the abrupt change in executive leadership.”
The surprise decision to change CEOs as its takeover closed was deceitful, according to John H. Mullin, who also served on Progress’s board.
“I do not believe that a single director of Progress would have voted for this transaction as structured with the knowledge that the CEO of Duke, Jim Rogers, would remain as the CEO of the combined company,” Mullin, a former managing director for investment banker Dillon Read & Co., wrote in a July 5 letter to The Wall Street Journal.
The new Duke board met without Rogers or Johnson and decided on the switch, Rogers said in a July 3 interview. Under terms of the merger, the board is composed of 11 Duke representatives and seven from Progress. Bostic and Mullin were among eight Progress directors who weren’t added to the new board.
The North Carolina Utilities Commission also will open an investigation into the transaction, according to a state filing. The commission ordered Rogers to appear at a hearing on July 10 to explain the timing of the decision to replace Johnson. Rogers will testify at the meeting, Duke spokesman Tom Williams said.
“We do not comment on our board’s deliberations,” Williams said in an e-mail. The company said on July 3 it wouldn’t comment further on Johnson’s resignation, which it has said was done by “mutual agreement.”
The controversy comes at a bad time for Duke, which already is embroiled in controversy over cost overruns at its Edwardsport, Ind., coal gasification plant, now estimated to cost $3.3 billion, and over what critics say were improperly cozy relations between some of the utility’s executives and Indiana regulators.
The Duke-Progress merger was announced in January 2011 and completed on July 2 after receiving state and federal approvals. Progress’s board unanimously recommended that shareholders vote in favor of the deal, according to a July 2011 regulatory filing.
“I don’t really have any idea what would have happened,” said Bostic, a former vice president of Georgia-Pacific LLC. “I expected that Johnson and Rogers were going to work together and they were going to make this a successful merger.”