ONEOK said last week that its board of directors has voted toterminate its planned merger with Southwest Gas. The terminationdecision was made pursuant to a provision in the merger agreementthat permitted any party to terminate if certain conditions werenot fulfilled by December 14, 1999. ONEOK notified Southwest of thetermination late last week.

“We worked very hard to make this deal happen,” said ONEOK CEOLarry Brummett, “but the bottom line is that even if we assume thatall regulatory approvals could be received in a timely manner,there is simply too much financial risk associated with SouthwestGas right now and we have a responsibility to protect ourshareholders from excessive risk.”

Brummett expressed financial concerns about Southwest, citingpending claims against Southwest in a lawsuit filed by SouthernUnion, an Austin, TX, natural gas distributor that made acompeting, unsuccessful bid to acquire Southwest. That lawsuit,filed in July 1999, subsequent to the signing of the mergeragreement, was recently highlighted by Arizona regulatory staff asa reason not to recommend approval of the merger at this time.

The merger had already received unanimous regulatory approval inNevada and had been recommended by the regulatory staff of thePublic Utility Commission for approval in California.

Brummett said ONEOK had been focused heavily on the SouthwestGas merger for the past 12 months, but that Southwest’s potentialmulti-million dollar liability was too much risk for ONEOK toassume.

“ONEOK’s strategy of growth through acquisitions has notchanged,” Brummett said. “We just won’t be making this particularacquisition. There are other opportunities in the natural gasmarket that better meet our business objectives, and we will beactively pursuing such opportunities.”

The ONEOK and Southwest merger, under consideration for the pastyear, would have created the largest stand-alone natural gasdistribution network in the U.S. ONEOK currently serves customersin Oklahoma and Kansas, and Southwest serves Arizona and parts ofCalifornia and Nevada.

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