(Updates with excerpt from complaint in third paragraph.)

Oct. 19 (Bloomberg) -- El Paso Corp. was sued by an investor claiming a proposed $21 billion Kinder Morgan Inc. takeover, the energy industry’s biggest transaction in more than a year, undervalues the company’s shares.

The Pipefitters Local Union No. 537 Trust Funds contends the El Paso board violated its duty to get the best price for the stock, according to a Delaware Chancery Court complaint filed today in Wilmington.

“The merger price negotiated by the board is inadequate and substantially undervalues El Paso,” which is “a thriving company that is poised to reward its equity investors,” lawyers for the funds said in the complaint.

Houston-based El Paso said Oct. 16 it would be bought for cash and stock to create the largest natural-gas pipeline network in the U.S.

The lawsuit “has absolutely no merit,” said El Paso spokesman Bruce Connery in a telephone interview.

The case is Pipefitters Local Union No. 537 Trust Funds v. Juan Carlos Braniff and El Paso Corp., CA5963, Delaware Chancery Court (Wilmington).

--Editors: Andrew Dunn, Glenn Holdcraft

To contact the reporter on this story: Phil Milford in Wilmington, Delaware at pmilford@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net