Southwest Gas sale hits new snag

Thursday, Jan. 6, 2000 | 9:57 a.m.

The proposed $1.8 billion-acquisition of Southwest Gas Corp. by Oneok of Tulsa, Okla., has encountered another obstacle.

The Arizona Corporation Commission staff, which supported the merger in June, now says it can't recommend the merger "at this time" because of a pending lawsuit over allegations of improprieties by Oneok and Arizona officials.

The Arizona commission has authority to rule in the case, because Las Vegas-based Southwest Gas distributes natural gas to customers in Phoenix and Tucson, Ariz.

"We're disappointed obviously with another delay recommendation by the staff," said Weldon Watson, a spokesman for Oneok.

"We are pleased that RUCO (the Residential Utility Consumer Office), which represents the ratepayers of Arizona, is for moving forward on this merger."

Southwest Gas had no comment on Wednesday.

"I don't believe this (merger application) has a prayer in the world," said Jerry Porter, a spokesman for Carl Kunasek, chairman of the commission.

Deborah Scott, director of the commission's utilities division, said voluntary withdrawal would be one of three "appropriate" resolutions of the matter.

Also, she wrote that it would be appropriate for the commission to dismiss the merger application but allow the companies to be refile later. Another option would be for the commission to keep the case open while evidence becomes available in a related lawsuit, she concluded.

"Some of Oneok's conduct during the merger process has been highly irregular," Scott said.

She pointed to evidence that Jack Rose was an adviser to Prudential Securities while serving as an commission official. She cited evidence to an agreement between Oneok and Prudential on the matter.

Prudential agreed to underwrite $210 million in bonds and other securities or, if the merger failed, Prudential would underwrite $300 million or more in corporate bonds for Oneok.

Scott noted that the FBI and district attorney in Phoenix have been investigating the matter. Also, Texas-based Southern Union Gas Co., an unsuccessful suitor for Southwest Gas, is suing over allegations of improper conduct by Southwest Gas and Oneok.

The commission is scheduled to vote on the merger on Feb. 11.