LV utility rated

Friday, June 30, 2000 | 10:55 a.m.

PaineWebber Inc. maintained its neutral rating on Southwest Gas Corp. of Las Vegas today, citing uncertainty surrounding litigation over its failed merger with ONEOK Inc. of Tulsa, Okla.

PaineWebber utilities analyst Ronald Barone said the company should continue to see customer growth rates in the neighborhood of 5 percent a year, "(making) Southwest an attractive acquisition candidate." Southwest officials have stated they are willing to entertain takeover offers.

"Given Southwest's strong customer growth and attractiveness as an acquisition candidate, we would normally price the company at a 20 percent premium to the (natural gas industry) peer group," Barone wrote. "However, as a result of the uncertainty surrounding current litigation related to the company's failed merger with ONEOK and modest prospects for earnings growth in the near term, we apply the group multiple to Southwest."

Barone set a target price of $19, a premium of just 5 percent over current levels.

Southwest has fraud lawsuits pending against both ONEOK and Southern Union Co. of Austin, Texas, both former suitors of the company.