Opinion ID: 2831514
Heading Depth: 2
Heading Rank: 1

Heading: The Saltville Acquisition

Text: The dispute in this case arose from a United Salt business deal to acquire a salt mining and storage facility in Saltville, Virginia (the Saltville Acquisition). Beginning in 2006, United Salt’s president, James O’Donnell, presented the Saltville Acquisition as a new business opportunity to the board of directors. The acquired land and facilities would be used to recover salt for sale, and a plan was formed to expand the Saltville facilities to drill additional wells to extract salt from the brine and to eventually use the underground caverns created by the brining process for gas storage. Due to concerns over the potential liabilities of operating a gas storage facility, Texas Brine was to create a new subsidiary to acquire the gas storage operations immediately after the Saltville Acquisition. 2 Iris P. W ebre served on the United Salt board of directors during the events in question. Prior to December 2007, Iris P. W ebre owned 46% of the voting stock in Texas United. At that time, each of her children owned about 12.5%. Sometime around December 2007, Iris P. W ebre sold each of the W ebre siblings 11.5% of the issued and outstanding Texas United shares, which increased each sibling’s overall ownership interest to 24%. 4 Thus, according to the plan, the newly formed subsidiary, Texas Brine Company Saltville, LLC, would acquire the gas storage operations, as well as the associated liabilities, from United Salt at a cost of approximately $3,451,500. Over the course of several years, corporate records reflect that the United Salt board of directors took numerous votes and actions with respect to conducting, affirming, and ratifying the Saltville Acquisition. Every vote was passed by a majority of the United Salt board of directors. Eventually, the United Salt board became aware that the cost of the Saltville Acquisition was exceeding initial projections, and the board commissioned investigations into the cost overruns to inquire about any possible wrongdoing. The investigations included the hiring of an independent accounting firm to conduct an audit of the Saltville Acquisition, but the accounting firm did not find any fraud or self-dealing in the payment of expenditures or costs. Financial projections for the Saltville Acquisition, which included projected cost overruns, forecasted that the deal would generate a net profit of $46 million over the first ten years. Each of the four Webre siblings, as shareholders of United Salt’s parent corporation, Texas United, were projected to receive approximately $10 million in profit from the deal over the same ten-year period. One United Salt director, Lloyd P. Webre, Jr. (Webre), who was also a Texas United director and shareholder, was not convinced about the profitability of the Saltville Acquisition. He dissented every time the United Salt board took a vote regarding the deal. He even visited the Saltville facility to question its management about his concerns. Time and again, he voiced his concerns at the United Salt director meetings to his family and the other directors, and time and again, a majority of the board of directors voted to proceed with the Saltville Acquisition. 5