Southwest Gas settles suit with shareholders

David Strow

Friday, July 27, 2001 | 10:27 a.m.

Southwest Gas Corp. said Thursday it has agreed to settle a two-year-old shareholder lawsuit, a move that will entitle long-term shareholders to cash payments.

Anyone who bought or owned stock between Dec. 14, 1998, and Jan. 21, 2000, will be entitled to receive proceeds from the settlement. The amount of cash that will be distributed to those shareholders ranges from $9.5 million to $27 million.

The settlement, given preliminary approval by a California federal judge, removes one piece of a web of litigation that has encircled Southwest Gas over its failed attempt to merge with ONEOK Inc. of Tulsa, Okla. This deal was first announced Dec. 14, 1998; it was called off on Jan. 21, 2000.

The shareholder lawsuit, first filed in California state court the day the ONEOK deal was announced, was later moved to federal court and amended several times. In the end, it accused the company of providing misleading information to investors regarding the offer by ONEOK and a counter-offer by Southern Union Co. of Austin, Texas. Southwest Gas rejected a higher Southern Union offer, saying it didn't believe the deal could close. Southern Union sued, and its allegations of regulatory manipulation in Arizona by Southwest Gas and ONEOK led the two to break off their merger plans.

Each of the three companies has sued the other two; a jury trial on these lawsuits is set to proceed in Phoenix federal court November 13.

The biggest payoff for shareholders in the settlement -- $27 million -- comes if Southwest Gas prevails in these lawsuits. If Southwest wins and is awarded damages, it would split the first $54 million with shareholders after paying its legal fees.

"The good part (of the settlement) from our perspective is that the shareholders will actively support our litigation against ONEOK and Southern Union, who we really think are the bad guys in this whole thing," said Thomas Sheets, general counsel of Southwest Gas. "We felt our shareholders' support in the litigation was very important."

"We are extremely pleased to have resolved the California litigation in this matter and that Southwest has agreed to share a substantial portion of its potential recovery in the Arizona litigation with its shareholders," shareholder attorney William Lerach said in a statement.

If the company is not awarded damages, but agrees to a takeover at any point over the next three years, the first $22 million paid for Southwest Gas will be paid out to the shareholder class identified in the settlement. This payment will come on top of whatever the shareholders would receive for their shares in a takeover.

If there isn't a settlement or award of damages in the next three years, Southwest will pay the shareholder class $9.5 million.

Sheets said all shareholders entitled to participate should receive notifications in August. Final approval of the settlement probably won't come until September 2002.