Representing the latest curve on what has become a very windyroad, Southwest Gas announced Wednesday it is reviewing SouthernUnion’s revised merger offer even though it already entered into amerger agreement with Oneok earlier this week. With two offers onthe table, Southwest Gas has said it will not comment further onthe subject until a decision is made, and industry analysts say thedecision will not be easy.

“Its a tough situation,” said Mike Heim, an analyst for AGEdwards. “Right now I’d say its a 50-50 shot. Money isn’t the onlyissue, and that has complicated things.”

Southwest agreed to merge with Oneok after the Tulsa, OK-basedcompany increased its offer from $28.50/share to $30/share earlierthis 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 passingregulatory approvals with more ease than Southern Union as thedeciding factor.

“Oneok has deeper pockets and has the ability to grow thecompany better than Southern Union,” said Zach Wagner, an EdwardJones analyst. “That gives Oneok a bit of an advantage in the eyesof regulators who are looking out for customers’ best interests.”

Severely disappointed by Southwest’s decision, Southern Unionraised its bid late Tuesday to $33.50/share. Southern Union alsosaid if given a merger agreement, it would pay 6% interest on theprice per share starting February 15, 2000 and ending when the dealclosed if regulatory issues hold up proceedings beyond that date.

“The $3.50/share difference is meaningful. That’s a lot ofdifference. The 6% is a little low,” Wagner said. “I could think ofbetter things to do with my money. It was a move to settle somefears, but I don’t know how many fears it will settle.”

Heim was not surprised that Southwest would consider SouthernUnion’s offer. “To fulfill their fiduciary duties, I would thinkthey would have to consider the option. They wouldn’t be doingtheir job for the shareholders if they didn’t. By reviewing theoffer, it doesn’t necessarily mean they’ve changed their minds.”

Consensus among analysts is a decision will be passed in thenext seven to 10 days. “The Southwest shareholders are puttingpressure on the Southwest board to get this thing done.” Wagnersaid.

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