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Southern Union Takes Southwest to Court

Southern Union Takes Southwest to Court

Southern Union gained permission Tuesday to join an existing lawsuit against Southwest Gas in a last-ditch attempt to overtake Oneok as the winner in the race to merge with Southwest. The lawsuit accuses Southwest Gas' board of directors of refusing to negotiate with Southern Union in good faith. None of the parties involved would comment further on the situation as of press time.

The original lawsuit was filed recently by Southwest shareholders in San Diego County's Superior Court. Southern Union said the original lawsuit accuses the Southwest board of seeking only to protect itself during the past merger negotiations.

In joining the lawsuit, Southern Union is asking the court for permission to directly solicit Southwest's shareholders to oppose the Southwest-Oneok agreement and to support Southern Union's efforts to merge. The suit also asks for a temporary restraining order and a preliminary injunction to stop further progress on the merger between Southwest and Oneok during the course of this litigation. Southern Union has also asked for compensatory and punitive damages.

Southwest accepted Oneok's initial merger offer last November. The boards of both companies signed the deal last week after Oneok sweetened the offer from $866 million to $912 million. The deal was sweetened because Southern Union offered a hostile bid in February of $32/share, or $966 million. When Southwest accepted Oneok's offer, Southern Union again increased its bid to $33.50/share. Southwest did not immediately change its mind, leading to further action by Southern Union.

George L. Lindemann, CEO of Southern Union, said, "There is no conceivable business reason for the management and board of Southwest to reject our offer. I believe Southwest's shareholders deserve the right to be heard on our offer, which provides them more than $108 million in additional value. Now it is time to let the shareholders themselves - not the board - decide what is in their best interests."

The lawsuit also alleges that Southwest Gas induced Southern Union to sign a standstill agreement before their negotiations started, preventing Southern Union from openly soliciting Southwest shareholder approval for its proposal. The standstill agreement was enforced Friday, April 30.

"Last Friday, Southwest tried to use the courts in an attempt to keep us from speaking directly to their shareholders" Lindemann said. "Why are they afraid to let their own shareholders hear both sides of the story? Why not let them make up their own minds?"

In related news, Southwest Gas, which provides gas to about 1.2 million customers in Arizona, Nevada and California earned a net income of $28.3 million in the first quarter of 1999, which was down $7.7 million from the same period in 1998. Michael Maffie, the company's CEO said the results were in line with expectations.

"The impact of weather was offset by customer growth, rate design improvements, lower financing costs and contributions from our construction services subsidiary. However, the positive first quarter results were overshadowed by the record earnings achieved in the first quarter of 1998, when weather conditions were colder than normal."

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ISSN © 2577-9877 | ISSN © 1532-1231
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