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(Reuters) - A New York-based investment fund that owns shares in U.S. engineering company Shaw Group Inc SHAW.N, has demanded that a special committee be set up to investigate Shaw's chairman for potential conflicts of interest as he looks to sell the company to Chicago Bridge & Iron Co (CBI.N) for $3 billion.
Denali Investors LLC, which called the offer by CB&I undervalued, said in a letter to independent directors that Shaw's chairman, James Bernhard, wants to close the deal by the first half of 2013 to enable him to run for the Senate or for governor of the U.S. state of Louisiana where Shaw is based.
"We believe this helps explain why the current deal discussions began in May 2012 and was timed to close in the first half of 2013, given any Senate candidate cannot afford to wait beyond 2013," Denali Investors said in the letter.
Denali also said if the directors allowed the sale to go ahead in its current form, "you are effectively rubber-stamping a massive and unwarranted transfer of value of approximately $1 billion to CB&I that belongs to Shaw shareholders."
CB&I in July said it would buy Shaw Group Inc SHAW.N for about $3 billion in cash and stock to create an engineering and construction company focused on the energy industry.
Denali said Shaw's management has yet to discuss the deal or the sale process with investors on a normally routine conference call.
Officials with Shaw could not be reached for comment outside regular U.S. business hours.
Reporting by Balaji Sridharan in Bangalore; Editing by Matt Driskill