Southwest Accepts Oneok's Offer
Oneok increased its offer to acquire Southwest Gas by $1.50
Monday, winning the Southwest Gas board of directors' approval and
defeating an unsolicited bid from Austin, TX-based Southern Union
Co. The new monetary total of the merger is $1.8 billion or
$30/share of common Southwest Gas stock. Southern Union had a
competing, unsolicited bid for Southwest of $32/share on the table,
but Southwest had reservations concerning Southern Union's
timetable for the deal's completion.
The combined company will be the primary gas distribution
company in Arizona, Kansas, Nevada and Oklahoma and will also have
a strong presence in California. It will also be the nation's
largest gas distribution company, serving 2.6 million people.
For Southwest, the deciding factor was that Oneok's offer
possessed a smaller amount of potential regulatory hang-ups. Oneok
does not have to receive approval from any state regulators while
Southern Union would need state approval in Missouri, Florida and
from the states where Southwest currently operates.
"The fact is, the longer the elapsed time for consummation, the
greater the uncertainties associated with Southern Union raising
the capital to fund the purchase," said Southwest CEO Michael
Maffie. Oneok said the deal would be closed by the year's end while
Southern Union said it could close the transaction in 18 months.
Questions were also raised about Southern Union's ability to
finance future growth, Southwest said.
"The Oneok-Southwest combination is the transaction that best
serves shareholders because it makes strategic sense - combining
the financial strength of Oneok with Southwest Gas, the country's
fastest growing gas-distribution utility - and because we believe
it can be completed in a timely fashion." Maffie added.
Southern Union, a gas distribution company in Texas and Missouri,
filed its unsolicited bid in late February (See Daily GPI, Feb. 23). "We are evaluating our
options at this point," George Yanowski, a Southern union spokesman,
said. "Beyond that, we aren't commenting at all."
Oneok and Southwest first agreed to a deal last December (See Daily GPI, Dec. 16). The terms of the
transaction call for three Southwest Gas board members to join Oneok's
board filling a current vacancy and two positions that will be vacated
due to retirements in 1999. Southwest Gas will operate as a division
of Oneok Inc. and will retain its name in the local markets it
serves. It is expected to be accounted for using the purchase method
and is expected to close during the fall of 1999. Southwest Gas
provides gas to about 1.2 million customers in Arizona, Nevada and
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