Edison Says ‘Poison Pill’ No Bar to SDG&E; Merger

SCEcorp remains “strongly committed” to its proposed merger with San Diego Gas & Electric, despite the enhanced severance package that SDG&E;’s board of directors adopted earlier this week, SCEcorp spokesman Lewis Phelps said Wednesday.

SDG&E;’s newly modified severance package is a “poison pill” that could make it more expensive for SCEcorp, the parent company of Southern California Edison, to merge with SDG&E;, a utility industry analyst said Wednesday.

The package would, under certain circumstances, double severance pay for SDG&E; employees who lose jobs within two years of an unsolicited “change of control” at the utility. SDG&E; has about 4,600 full-time employees.

Questioned Action

Edison executives on Wednesday questioned whether “this action by SDG&E;’s board is in the best interest of SDG&E; shareholders and employees,” according to Phelps.

Payments mandated by the new severance plan could force Edison to limit electric rate reductions that SCEcorp has promised to San Diegans should the merger occur, Phelps said.

SCEcorp Chairman Howard Allen, in a bid to rally support among San Diegans, recently promised to cut SDG&E;’s residential electric rates by 10% if the proposed merger occurs. However, increased severance payments would “obviously affect customer rate reductions that Edison will otherwise be able to offer,” Phelps said.

Edison “does not have any severance plan for its employees or officers,” according to Phelps. However, the Rosemead-based utility is “strongly committed to giving fair treatment to SDG&E;’s employees and Edison’s employees” should jobs be cut as a consequence of the proposed merger, Phelps said.

An SDG&E; spokesman on Wednesday declined to comment on the severance plan.

Offer Increased

SDG&E; adopted the modified severance plan just one business day after Edison raised the value of its stock-swap merger bid for SDG&E; to $2.12 billion from $2.03 billion. SCEcorp increased the ratio of its proposed stock swap to 1.20 shares of SCEcorp stock for each share of SDG&E;, up from 1.15 shares.

SDG&E; and Edison have exchanged financial data since the first offer was made in late July, but “there have been no negotiations and no ‘yes or no’ response,” Phelps said. “As far as Edison is concerned, our offer to merge still stands.”

SDG&E;’s board of directors has until the close of business Sept. 1 to respond to SCEcorp’s merger offer, Phelps said.