Southwest Gas/Oneok Merger Aces Nevada PUC
Oneok's proposed merger with Southwest Gas received a big shot
in the arm yesterday, as the Nevada Public Utilities Commission
(PUCN) unanimously approved the deal two months ahead of schedule.
Although approval is still needed from Arizona and California
regulators as well as Southwest Gas shareholders, both companies
are confident the merger will be completed in the previously
announced fourth quarter 1999 timeframe.
"Nevada's utility regulators have carefully scrutinized our
merger proposal and determined that it serves the public interest,"
said Michael Maffie, CEO of Southwest Gas. "This is the first of
three state utility regulatory approvals that we must obtain before
we can complete the combination of our two companies. We expect
that Nevada's endorsement of our merger will set the tone for
regulatory consideration by the Arizona Corporations Commission
(ACC) and California Public Utilities Commission." The merger
already has been cleared by the SEC.
Oneok and Southwest first agreed to a deal last December (See
Daily GPI, Dec. 16). 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
A Southwest Gas spokesperson, who wished to remain anonymous,
said the merger's easy passage of its first regulatory approval
affirms the company's choice to join with Oneok instead of Southern
Union, a Missouri-based utility that made a competing offer for
Oneok last February. Southwest turned Southern Union down in late
April (See Daily GPI, April 27, 1999).
"When we rejected Southern Union," the spokesperson said, "one
of the main reasons was that our board believed a Southwest
Gas/Southern Union combination would not proceed through the
regulatory process without experiencing delays and caveats to the
agreement. As you can see from the Nevada results, the Oneok deal
offers smooth regulatory sailing."
One of the main attractions of a combined Oneok and Southwest
Gas company is the mix of Oneok's strong balance sheet with
Southwest's growth and capital expenditure program. "In order to
grow, Southwest Gas has become highly leveraged," the spokesperson
explained. "Oneok has the balance sheet to improve our debt rating.
In fact, one of the stipulations in the merger agreement is that
Oneok must help Southwest raise its debt rating from a triple B- to
a triple B+. Southern Union is also a heavily leveraged company,
and our board didn't think they would be able to help out with our
debt as much as Oneok."
Southwest and Oneok will tackle the Arizona commission next, the
spokesperson said. There is dialogue between the merging companies
and the ACC, but no schedule has been set.
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