Foe slams Southern Union tactics

David Strow

Tuesday, Aug. 3, 1999 | 11:21 a.m.

ONEOK Inc. fired back Monday at rival Southern Union Co., asking a federal judge to hold Southern Union in contempt for attempting to influence the shareholder vote on ONEOK's planned acquisition of Southwest Gas Corp. of Las Vegas.

ONEOK claims Southern Union violated a preliminary injunction when it filed suit against ONEOK and Southwest in Arizona federal court July 19. In that lawsuit, Southern Union claimed ONEOK and Southwest, together with two Arizona regulators, conspired to derail Southern Union's unsolicited takeover bid for Southwest.

But in a motion filed with the U.S. District Court in Tulsa, Okla., Monday, ONEOK called the lawsuit little more than an attempt to generate negative press coverage during the shareholder voting period.

"Southern Union has made accusations against ONEOK and Southwest in the Arizona complaint that it cannot make directly to shareholders without running afoul of the Preliminary Injunction, and it has ensured that the Arizona complaint and its unsubstantiated allegations will find their way into the hands of those shareholders," the lawsuit reads.

"With the critical Southwest shareholder vote just days from now, ONEOK has every reason to expect that Southern Union will continue or even intensify in its violations unless this Court enforces its Preliminary Injunction with a citation of contempt."

Southwest shareholders are scheduled to vote on ONEOK's offer Aug. 10. ONEOK has offered $30 per share, or $1.8 billion; Southern Union has counteroffered $33.50 per share, or $1.88 billion.

On May 17, Judge Erik Holmes issued an injunction against Southern Union barring it from attempting to influence the shareholder vote on the ONEOK offer for Southwest. Southern Union has appealed, but both Holmes and the appeals court have refused to stay the injunction while the appeals process continues.

Southern Union Treasurer George Yankowski, citing that injunction, declined to comment today when reached at Southern Union headquarters in Austin, Texas.

Shortly after filing its lawsuit July 19, Southern Union forwarded a copy to the Wall Street Journal, which the paper used for a July 20 story, ONEOK said.

"The obvious purpose of supplying the Arizona complaint directly to the Wall Street Journal was to ensure prompt reporting of Southern Union's false allegations in an effort to influence the voting on the Southwest-ONEOK merger," ONEOK, which is based in Tulsa, Okla., said.

In a third allegation, ONEOK accuses Eric Herschmann, a Southern Union attorney, of sending a letter to Sitrick & Co., Southwest's public relations advisory firm during the merger process. The letter threatens Sitrick with "immediate legal action" if Sitrick distributed "disparaging, defamatory, slanderous and/or libelous information" about Southern Union or its chairman, George Lindemann.

ONEOK also accused Lindemann and affiliates of acquiring 500,000 Southwest shares in May, holding them until June 28, then voting them against the merger. He then sold the shares, ONEOK said.

"Southern Union has supplemented its publicity offensive with blatant threats and intimidation in an effort to keep Southwest from waging a well-grounded counterattack," ONEOK said.

"Thus, while taking steps to disseminate its falsehoods through press coverage of its court filings, Southern Union is threatening 'to seek the greatest relief available' if Southern Union concludes that something published by Southwest's publicity firm might be deemed defamatory."