Southern Union Tops ONEOK Offer For Southwest
It's funny how an extra hundred million dollars will get your attention.
That's what the board of directors of Southwest Gas Corp. have to contend
with in the form of an unsolicited proposal from Southern Union Co., after
they already had signed off on an offer from ONEOK Inc.
Southern Union jumped into the game last week, offering to acquire Southwest
Gas for $32/share in cash ($973 million), a price $3.50/share higher than
ONEOK's cash offer - approved by the board last December - of $28.50/share
($867 million). (see NGI Dec. 21, 1998) Southern
Union is beginning due diligence for the possible merger. The transaction
would be accounted for as a purchase and Southern Union expects it would
be immediately accretive to cash flow.
A combination with Southwest Gas of Las Vegas, NV, would make Austin,
TX-based Southern Union the nation's largest gas-only distribution company,
increasing Southern Union's customer base by 1.2 million customers, to
total more than 2.2 million customers." Southern Union serves customers
in Texas, Missouri, Florida, and Mexico. Southwest Gas serves customers
in Nevada, Arizona, and California.
George L. Lindemann, Southern Union CEO, said, "A combination of
Southwest Gas and Southern Union is an excellent opportunity for shareholders,
employees and customers of both companies. Southwest Gas shareholders would
receive a significant premium for their investment over Southwest's pending
merger agreement with ONEOK. Additionally, we believe that Southwest's
rapidly growing customer base combined with Southern Union's experience
as one of the most cost-effective operators in the industry would create
significant value for shareholders."
Under the proposal, Southwest Gas would operate as the Southwest Gas
Division of Southern Union, headquartered in Las Vegas, and retain its
name in the local markets it serves. In addition, three Southwest Gas board
members would be invited to join Southern Union's board. The remaining
Southwest Gas board members would be invited to serve on an advisory board
for the Southwest Gas Division.
Under terms of the agreement with ONEOK, as a result of certain preliminary
determinations made by the board of directors of Southwest Gas, the Southwest
Gas board has authorized management to commence substantive discussions
with Southern Union regarding its proposal. The merger agreement with ONEOK
remains in full force and effect, and based on the information currently
available to it, the board of Southwest Gas has not altered its recommendation
regarding the merger agreement with ONEOK.
In a news release, ONEOK CEO Larry Brummett said, "Obviously, we
were surprised by the Southern Union offer. We based our offer on due diligence,
consultation with investment advisors and sound business judgment. We believe
our offer is fair, competitive and still valid."
Both Southern Union and Southwest Gas said they would not comment further
until an agreement is reached or negotiations are terminated.
Joe Fisher, Houston