Algonquin Power & Utilities Corp. (APUC) continued its campaign to acquire Gas Natural Inc. on Wednesday, making public a letter to the Gas Natural board arguing for the buyout of its company by APUC unit Liberty Utilities Co. and airing some of Gas Natural management's dirty laundry at the same time.

Toronto-based Algonquin owns almost 5% of Gas Natural's outstanding shares and has been campaigning for a deal since early this year (see Daily GPI,July 22). "...[W]e are supportive of a transaction structure that would permit a broader sale process and the realization of more than $13.00 per share should a higher offer be made by another qualified party," the letter said.

Utilities owned by Mentor, OH-based Gas Natural serve about 73,000 customers in Montana, Wyoming, Ohio, Pennsylvania, Maine, North Carolina and Kentucky. It also has interstate pipeline, natural gas production and gas marketing operations.

Over the last two and a half years, Liberty Utilities has acquired gas distribution utilities that serve more than 285,000 customers in six states. APUC has about $3.7 billion in North American assets and operates through Liberty, as well as Algonquin Power Co. "Liberty Utilities is a reliable, cost effective provider of rate regulated water, electricity and gas distribution and transmission utility services to more than 485,000 customers across the United States," the letter said.

Those virtues are quite different from APUC's assessment of Gas Natural and its management, which "...has failed to articulate a clearly quantified growth strategy..." according to APUC.

The letter brought up an investigative audit of Gas Natural that was conducted last year by the Public Utilities Commission of Ohio (PUCO). It found "'severe organizational dysfunction,'" according to APUC. "...[W]e believe that trust between a utility and its regulators is a critical driver of value and that, once broken, such trust is not easily or quickly reestablished, absent a dramatic and fundamental change of the nature that a sale of the company would offer," APUC said.

APUC also cited a management shakeup at Gas Natural in May that saw the appointment of CEO Greg Osborne without "any formal executive search process," according to APUC.

"Greg Osborne is the son of Richard Osborne, the previous Gas Natural CEO, and does not have the utility management experience that we believe is necessary to address the significant challenges facing the company. We are particularly troubled by his appointment given the deteriorated relationship between state regulators and the company under the leadership of his father...and the web of relationships between the company and entities affiliated with Richard Osborne that have been a primary focus of regulator concern. Greg Osborne was, in fact, an officer of one or more of these entities during the period in which the PUCO determined that dealings between these entities and subsidiaries of the company were inappropriate."