SCE Boosts Bid in SDG&E; Offer
SCEcorp, the parent company of Southern California Edison Co., on Wednesday raised the value of its stock swap merger bid for San Diego Gas & Electric to $2.16 billion from $2.12 billion, according to spokesmen at both utilities.
SCEcorp has demanded a response from SDG&E;'s board of directors by the close of business today. SDG&E; spokesmen Dave Smith declined Wednesday to confirm SCEcorp’s claim that the San Diego utility’s board of directors will meet this morning to vote on SCEcorp’s merger offer.
The Rosemead-based holding company’s latest bid represents a "$1-billion premium over book value” for SDG&E; shareholders, according to SCEcorp Chairman Howard Allen. “The new exchange ratio represents a price of 186% of book value.
SDG&E;'s board “can rest assured that it has extracted from us the highest price we are willing to pay,” Allen wrote in a letter delivered Wednesday to SDG&E; Chairman Thomas Page.
The newest exchange ratio represented a 50% increase over the 1.15 share exchange ratio first offered by SCEcorp on July 26, according to Allen. The latest offer would boost earnings for SDG&E; shareholders by 23% during 1988 should the merger be completed, Allen said.
‘Best and Final Offer’
Allen’s letter also suggested that SCEcorp has opted against making a hostile bid or a tender offer for SDG&E.; The offer made Wednesday was “our best and final offer for San Diego Gas & Electric,” Allen wrote.
Allen’s statement “should be taken at face value,” SCEcorp spokesman Lewis Phelps said Wednesday. “This is our best and final offer.”
SCEcorp on Wednesday distributed copies of Allen’s letter, which was delivered after the market closed, to reporters. SDG&E; stock closed up $.125 at $35.50.
SDG&E;'s board will study the most recent offer, according to Smith, who declined further comment on SCEcorp’s merger proposal.
In his letter to Page, Allen hinted that SDG&E; has sought modifications in its previously signed merger agreement with Tucson Electric Power. However, SDG&E; spokesman Dave Kusumoto declined to describe progress on negotiations between SDG&E; and TEP.
SCEcorp predicated its merger on SDG&E; abandoning its previously announced merger agreement with TEP. According to the terms of that agreement, SDG&E; would have to pay $25 million to TEP should the merger not take place.
SCEcorp had “hoped to engage in negotiations . . . (with SDG&E; but) your board has chosen not to negotiate with us prior to making its decision,” said the letter Allen sent to Page.