NiSource suffered two significant setbacks last week in itsbattle for a $5.7 billion hostile takeover of Columbia EnergyGroup, but the company vowed to continue its pursuit of Columbia.

A Delaware Court of Chancery judge dismissed a NiSource lawsuitaimed at forcing Columbia to reconvene its annual stockholders’meeting in order to elect a 13th member to the board of directors.NiSource claimed Columbia acted illegally in not filling thevacancy at its last annual meeting, and NiSource was seeking toelect its own representative for Columbia’s board as part of itscampaign to annex the Herndon, VA, company. But the judge said onWednesday he did not believe there was a legal or practical basisfor restaging the annual meeting. NiSource, which made the takeoverbid in early June, has two other lawsuits targeting Columbia stillto be decided.

Meanwhile, Ohio State Representative David Goodman (R-Bexley),who already has publicly opposed the merger, has introducedlegislation designed to close a loophole in Ohio law that wouldallow hostile takeovers of gas utilities to take place withoutpublic review and scrutiny. Goodman was joined as sponsor of thelegislation by 77 of the 99 members of the Ohio House ofRepresentatives.

NiSource was expecting smooth sailing through the regulatoryprocess in Ohio because under current Ohio law a hostile takeoverbid for a gas utility is not subject to regulatory review. “This isa serious loophole that puts Ohio’s natural gas customers at risk,”said Goodman, who serves on the House Public Utilities Committee.”My bill would close the loophole by giving the Public UtilitiesCommission of Ohio (PUCO) clear and unambiguous authority to reviewhostile takeover bids targeting natural gas utilities in Ohio.

“This legislation is about disclosure and accountability. Itwould require companies like NiSource to explain, in detail and onthe record, how their hostile takeover bids would be beneficial forOhio consumers and good for the employees of Ohio’s natural gascompanies,” he added. “If a NiSource-Columbia merger really is goodfor Ohio, NiSource officials should support my legislation andwelcome the opportunity to stand before state regulators andtestify to that effect.”

If passed and signed by the governor, the Ohio legislation wouldrequire the PUCO to begin a public investigation of any hostiletakeover bid for an Ohio natural gas utility at the time when atender offer is made. It also would prohibit the PUCO fromapproving any hostile takeover bid for an Ohio natural gas utilityunless the Commission determines that the merger would promoteconvenience and result in adequate, reasonably priced gas service.In addition, it would require the company seeking the hostiletakeover bid to demonstrate that its proposed takeover would infact serve the public’s best interests.

Goodman said the bill has strong bipartisan support and “shouldsend a loud and unmistakable message to potential Wall Streetraiders that Ohio is serious about protecting its consumers fromhostile takeovers that can’t be shown to be in their bestinterests.”

It’s not the first time Goodman has spoken out against theproposal. In July, he warned regulators and legislators a takeoverof Columbia by NiSource could lead to “the closing of the Columbusheadquarters for Columbia Gas of Ohio, hundreds of lost jobs inColumbus and other Ohio cities, higher prices for Ohio consumers,and diminished ability of Columbia Gas to provide a reliable sourceof natural gas for millions of Ohioans.”

Several elected officials joined Goodman last week at a newsconference held near Columbia Gas of Ohio’s headquarters indowntown Columbus. Supporters of his legislation included StateRepresentative and Public Utilities Committee Chair Priscilla Mead(R-Columbus) and State Rep. Joyce Beatty (D-Columbus).

NiSource spokeswoman Maria Hibbs said last week followingGoodman’s announcement that the Merrillville, IN-based utility wasunfazed by the legislation, which she said would merely put thestate on the same regulatory footing as the other states in whichNiSource would need approval of a Columbia takeover.

“We will be prepared to share our vision for the combination andwhy it will be beneficial for customers and shareholders [inOhio],” she said. “Our basic corporate philosophy is to work withregulatory bodies at all levels and government officials at alllevels.” Hibbs also said the legal setback last week was not enoughto alter the company’s course. She said there has been no change inthe company’s offer and that it is as determined as ever to carryout its takeover plan.

NiSource’s $68/share tender offer to Columbia shareholders beganJune 25, and the Aug. 6 deadline was extended to Oct. 15. As ofAug. 6, 60% of Columbia’s outstanding shares had been tendered,according to NiSource. Columbia has repeatedly rejected NiSource’sovertures, saying the offer is at the wrong price, the wrong timeand is being made by the wrong company.

Rocco Canonica

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