Southwest Stuck between Two Merger Offers
Representing the latest curve on what has become a very windy
road, Southwest Gas announced Wednesday it is reviewing Southern
Union's revised merger offer even though it already entered into a
merger agreement with Oneok earlier this week. With two offers on
the table, Southwest Gas has said it will not comment further on
the subject until a decision is made, and industry analysts say the
decision will not be easy.
"Its a tough situation," said Mike Heim, an analyst for AG
Edwards. "Right now I'd say its a 50-50 shot. Money isn't the only
issue, and that has complicated things."
Southwest agreed to merge with Oneok after the Tulsa, OK-based
company increased its offer from $28.50/share to $30/share earlier
this week. The agreement sparked a hostile bid from Austin,
TX-based Southern Union, which offered to take over Southwest at
$32/share. Southwest cited the probability of Oneok passing
regulatory approvals with more ease than Southern Union as the
"Oneok has deeper pockets and has the ability to grow the
company better than Southern Union," said Zach Wagner, an Edward
Jones analyst. "That gives Oneok a bit of an advantage in the eyes
of regulators who are looking out for customers' best interests."
Severely disappointed by Southwest's decision, Southern Union
raised its bid late Tuesday to $33.50/share. Southern Union also
said if given a merger agreement, it would pay 6% interest on the
price per share starting February 15, 2000 and ending when the deal
closed if regulatory issues hold up proceedings beyond that date.
"The $3.50/share difference is meaningful. That's a lot of
difference. The 6% is a little low," Wagner said. "I could think of
better things to do with my money. It was a move to settle some
fears, but I don't know how many fears it will settle."
Heim was not surprised that Southwest would consider Southern
Union's offer. "To fulfill their fiduciary duties, I would think
they would have to consider the option. They wouldn't be doing
their job for the shareholders if they didn't. By reviewing the
offer, it doesn't necessarily mean they've changed their minds."
Consensus among analysts is a decision will be passed in the
next seven to 10 days. "The Southwest shareholders are putting
pressure on the Southwest board to get this thing done." Wagner
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