Gabelli: Southwest Gas should settle suits

David Strow

Thursday, Sept. 6, 2001 | 11:27 a.m.

Southwest facts

Southwest Gas Corp., a Las Vegas-based company, is the largest supplier of natural gas in Nevada and Arizona.

It serves 1.34 million customers in Nevada, Arizona and California, and is the largest natural gas utility in Las Vegas, Reno, Phoenix and Tucson, Ariz.

The company had 2,500 employees as of Dec. 31. It reported $1.03 billion in revenue last year.

Southwest Gas Corp.'s largest shareholder said Wednesday he is considering opting out of a class-action settlement announced by the Las Vegas utility in July.

In documents filed with the Securities and Exchange Commission Wednesday, New York investor Mario Gabelli said he has requested more time to consider whether to opt out of the settlement agreement. Las Vegas-based Southwest has consented to this request, Gabelli's filing said, but the California court overseeing the shareholder lawsuit must still approve it.

"As Mr. Gabelli pointed out in his ... filing, the company has agreed to grant an extension of time to consider the settlement that has been filed with the court," said Thomas Sheets, vice president and general counsel of Southwest Gas. "The company continues to believe the settlement is in the best interest of all its shareholders."

The settlement agreement would end a class-action lawsuit first filed in California federal court in 1998, which accused the company of providing misleading information to investors regarding an offer for Southwest Gas by ONEOK Inc. of Tulsa, Okla., and a counter-offer by Southern Union Co. of Austin, Texas. Shareholders who bought or owned Southwest Gas stock between Dec. 14, 1998, and Jan. 21, 2000, are included in the settlement group; by opting out of this settlement, Gabelli would preserve his ability to take legal action against the company at a later date.

Southwest Gas accepted ONEOK's $1.8 billion bid over a richer offer by Southern Union, but allegations of regulatory manipulation in Arizona and a Southern Union lawsuit stalled the deal. ONEOK broke off merger talks in January 2000; all three companies have now sued each other in Arizona court. The trial to resolve the web of lawsuits is set to begin in Phoenix on Nov. 13.

Southwest shareholders included in the class-action settlement would be entitled to receive up to $27 million if the company is awarded damages in these lawsuits. They would receive $22 million if the company is instead acquired in the next three years; if neither occurs, the shareholders would receive $9.5 million. The funds likely would come from Southwest Gas insurers.

But Gabelli hasn't been interested in pursuing the lawsuits against ONEOK and Southern Union. Instead, the prominent investor has repeatedly called for Southwest Gas to settle the lawsuits, which he believes would open the door for a buyout of Southwest Gas.

He has also been critical of Southwest Gas management in the past.

"They've made some strange decisions over the last five years ... it's been terrible," Gabelli told the Sun in March 2000. "(Now) they're trying to hide in a smoke-filled room. I don't like that."

In each of the past two years, Gabelli has nominated independent slates for Southwest's board. So far, however, the only Gabelli nominee to be elected to the board is New York attorney Mark Feldman.

"I just want to bring some common sense to the board," Gabelli said in May.

Gabelli also disclosed Wednesday that he has been increasing his stake in Southwest Gas in recent days. Gabelli now holds 3.18 million Southwest Gas shares, a 9.88 percent stake in the company.

Gabelli said he has increased his stake by 96,400 shares since July 16, spending $3.64 million. Gabelli acquired 108,600 shares and sold 12,200 shares at prices ranging from $20.33 to $24.31 per share.

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