New firm bids for Southwest Gas

A new candidate emerged today to buy Las Vegas' natural gas company.

A Texas gas company upped the stakes for Southwest Gas Corp. by making an unsolicited merger proposal for the company. Southern Union Co., Austin, offered to acquire Southwest Gas for $32 a share in cash.

Meanwhile, the Tulsa, Okla., company that made a $28.50-per-share bid for Southwest in December responded within hours that it would press ahead with its original offer.

ONEOK Inc., a company that provides natural gas to about 1.4 million customers in Oklahoma and Kansas, issued a release shortly after the Southern Union bid became public.

"Obviously, we were surprised by the Southern Union offer," Larry Brummett, ONEOK's chairman and chief executive officer, said in the statement. "We based our offer on due diligence, consultation with investment advisers and sound business judgment. We believe our offer is fair, competitive and still valid."

The ONEOK bid is valued at $1.8 billion while the Southern Union offer totals $1.85 billion.

A Southern Union spokesman said this morning that the terms of his company's agreement are nearly identical to that of the ONEOK bid.

"It's exactly the same except the purchase price is superior," said George Yankowski, treasurer and director of investor relations with Southern Union.

He said the Southern Union bid includes a letter from financial sources indicating the company is highly confident it can raise the capital for the transaction.

Southwest Gas, which made its initial filing on Friday to the Public Utilities Commission of Nevada for merger approval with ONEOK, said it would not comment on the Southern Union bid until it is either accepted or rejected.

Southwest spokesman Roger Buehrer and Yankowski did not specify whether the status of Southwest's president and chief executive would change under the Southern Union proposals. As part of the ONEOK deal, Southwest's Michael Maffie would resign from that position.

"A combination of Southwest Gas and Southern Union is an excellent opportunity for shareholders, employees and customers of both companies," said George Lindemann, chairman and chief executive officer of Southern Union. "Southwest Gas shareholders would receive a signficant premium for their investment over Southwest's pending merger agreement with ONEOK.

"Additionally, we believe that Southwest's rapidly growing customer base combined with Southern Union's experience as one of the most cost-effective operators in the industry would create significant value for shareholders."

A combination with Southwest Gas would make Southern Union the nation's largest gas-only distribution company, increasing Southern Union's customer base to 2.2 million customers. Southern Union presently operates in Texas, Missouri, Florida and Mexico while Southwest Gas has customers in Arizona and California as well as Nevada.

Under Southern Union's proposal, Southwest Gas would operate as the Southwest Gas Division of Southern Union and would be headquartered in Las Vegas. The company would retain its name in the local marketplace and three Southwest Gas board members would be invited to join Southern Union's board. The remaining Southwest Gas board members would be asked to serve on an advisory board for the local division.

The company does not anticipate any layoffs as a result of the transaction.

State consumer advocate Fred Schmidt said today he hasn't analyzed the Southern Union proposal, but he believes today's new offer indicates a need for new state policies to protect ratepayers.

"The increased price per share clearly points out that the Public Utilities Commission needs to develop a policy on ratepayer exposure responsibility," Schmidt said. "Ratepayers should have no obligation to pay those (merger) costs."

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