Archive for Wednesday, November 21, 2001

Western sues utility over collapsed merger

November 21, 2001

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— Western Resources filed a lawsuit Tuesday seeking "hundreds of millions of dollars" from Public Service Company of New Mexico over the failure of their planned $4.4 billion merger.

Western said the New Mexico utility, also known as PNM, breached their merger agreement and has "a classic case of buyer's remorse."

The suit was filed in New York.

"PNM's conduct, in seeking to back away from its deal and in interfering with its consummation, has caused substantial injury to Western Resources and its shareholders for which PNM should be held fully accountable," Western Resources chairman David Wittig said.

The companies announced the merger in November 2000, in which Western would sell its KGE and KPL utilities to PNM. In addition, PNM would assume a large portion of Western's debt. Western was to retain its nonregulated business interests, including its stake in its Protection One security division.

Western had planned to reorganize before its merger with PNM, but the Kansas Corporation Commission rejected Western's plan in July. The KCC also denied Western's request for a rate increase, instead ordering a $15.7 million rate cut.

Merger talks with PNM then stalled, and PNM sued Western in New York state court.

PNM's lawsuit, filed Oct. 12, accuses Western of trying to force it to complete the merger under its original terms, even though the KCC declared that those terms were not in the public interest. PNM also wants a declaration that it has cause to terminate its agreement with Western.

PNM also wants to force Western to pay it monetary damages, though the amount is not specified in the lawsuit.

Walker Hendrix, consumer counsel for the Citizens' Utility Ratepayers Board, said the fact that the two parties are in litigation does not bode well for the strained agreement.

"It would seem to me that the deal between Western and PNM is dead," Hendrix said.

Western claims PNM backed out of the deal because PNM's stock price rose after the planned merger was announced, making the merger more costly for PNM.

Western provides electricity to about 636,000 customers in Kansas. PNM supplies electricity to about 369,000 customers in New Mexico and natural gas to 435,000.

Shares of Western closed up 10 cents Tuesday at $17.20 on the New York Stock Exchange. Shares of PNM closed higher by 34 cents to $26.79.

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