Daily GPI / NGI All News Access

Southwest Stuck between Two Merger Offers

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 deciding factor.

"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 said.

©Copyright 1999 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1231
Comments powered by Disqus