Southern Union Takes Southwest to Court
Southern Union gained permission Tuesday to join an existing
lawsuit against Southwest Gas in a last-ditch attempt to overtake
Oneok as the winner in the race to merge with Southwest. The
lawsuit accuses Southwest Gas' board of directors of refusing to
negotiate with Southern Union in good faith. None of the parties
involved would comment further on the situation as of press time.
The original lawsuit was filed recently by Southwest
shareholders in San Diego County's Superior Court. Southern Union
said the original lawsuit accuses the Southwest board of seeking
only to protect itself during the past merger negotiations.
In joining the lawsuit, Southern Union is asking the court for
permission to directly solicit Southwest's shareholders to oppose
the Southwest-Oneok agreement and to support Southern Union's
efforts to merge. The suit also asks for a temporary restraining
order and a preliminary injunction to stop further progress on the
merger between Southwest and Oneok during the course of this
litigation. Southern Union has also asked for compensatory and
Southwest accepted Oneok's initial merger offer last November.
The boards of both companies signed the deal last week after Oneok
sweetened the offer from $866 million to $912 million. The deal was
sweetened because Southern Union offered a hostile bid in February
of $32/share, or $966 million. When Southwest accepted Oneok's
offer, Southern Union again increased its bid to $33.50/share.
Southwest did not immediately change its mind, leading to further
action by Southern Union.
George L. Lindemann, CEO of Southern Union, said, "There is no
conceivable business reason for the management and board of
Southwest to reject our offer. I believe Southwest's shareholders
deserve the right to be heard on our offer, which provides them
more than $108 million in additional value. Now it is time to let
the shareholders themselves - not the board - decide what is in
their best interests."
The lawsuit also alleges that Southwest Gas induced Southern
Union to sign a standstill agreement before their negotiations
started, preventing Southern Union from openly soliciting Southwest
shareholder approval for its proposal. The standstill agreement was
enforced Friday, April 30.
"Last Friday, Southwest tried to use the courts in an attempt to
keep us from speaking directly to their shareholders" Lindemann
said. "Why are they afraid to let their own shareholders hear both
sides of the story? Why not let them make up their own minds?"
In related news, Southwest Gas, which provides gas to about 1.2
million customers in Arizona, Nevada and California earned a net
income of $28.3 million in the first quarter of 1999, which was
down $7.7 million from the same period in 1998. Michael Maffie, the
company's CEO said the results were in line with expectations.
"The impact of weather was offset by customer growth, rate
design improvements, lower financing costs and contributions from
our construction services subsidiary. However, the positive first
quarter results were overshadowed by the record earnings achieved
in the first quarter of 1998, when weather conditions were colder
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