Archive for Tuesday, April 27, 1999


April 27, 1999


Facing a bidding war for the company, Oneok raised its offer for the Las Vegas-based gas company and won.

Las Vegas -- Southwest Gas Corp., which sparked a bidding war over its fast-growing natural gas business, agreed Monday to be bought by Tulsa, Okla.-based Oneok Inc. in a sweetened cash deal valued at $1.8 billion, or $30 a share, including assumed debt.

The acquisition, which amends a $28.50-per-share accord reached in December, would create the largest stand-alone gas distribution company in the United States, Southwest said. It would serve 2.6 million customers in Arizona, Kansas, Nevada, Oklahoma and California.

Analysts said the deal would combine Southwest's quick growth with Oneok's solid management and regulatory experience.

Oneok is 45 percent owned by Topeka-based Western Resources Inc.

"It looks like a pretty positive deal," said Joanne Fairechio, analyst with Salomon Brothers. "Southwest is the fastest-growing gas company in the country ... and I think the integration with Oneok and its management will be good."

Separately, Southwest's board also said it rejected a previously announced unsolicited $1 billion, or $32-a-share, offer from Southern Union Co., citing serious doubts about the likelihood and timing of completion.

Southwest said Texas-based Southern Union's offer, which came as a surprise in late February after Southwest had agreed to be bought by Oneok, was turned down because it would "face a more protracted and difficult time in obtaining regulatory approvals," lasting 18 months or longer, Southwest said Monday.

"The fact is, the longer the elapsed time for consummation, the greater the uncertainties associated with Southern Union raising the capital to fund the purchase," said Michael Maffie, president and chief executive officer of Southwest Gas.

Southwest Gas said that after reviewing available information, it concluded that Oneok should be able to obtain all regulatory approvals and close its purchase of Southwest before the end of the year.

The Oneok-Southwest Gas combination does not require regulatory approval in any of the states in which Oneok currently operates, Southwest said, whereas Southern Union would have been required to obtain approvals from regulators in Missouri and Florida, from federal regulators and from the states where Southwest currently operates.

Oneok's offer includes a sizable debt load from Southwest, but analysts said it was not a cause for concern. Michael Heim of A.G. Edwards said the deal would raise Oneok's debt-to-capital ratio to 65 percent from a current 30 percent.

"They will be taking on a lot of debt to complete the deal," Heim said. "I don't think this is a concern because it should be temporary."

Southwest Gas, based in Las Vegas, provides natural gas to about 1.2 million customers in Arizona, Nevada and California. Oneok is engaged in natural gas intrastate distribution and transmission, gas processing, gas marketing and gas production.

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