Rosemead-based SCEcorp, frustrated in its earlier $2.16-billion bid to merge with San Diego Gas & Electric, wants to take its case directly to SDG&E; shareholders, possibly through a proxy fight, a stock exchange offer or a special shareholder meeting, according to court documents filed Friday in Superior Court in San Diego.
SCEcorp, the parent company of Southern California Edison, has filed for a court order that would force SDG&E; to turn its shareholder mailing list over to SCE, which wants to “communicate directly” to SDG&E; shareholders. SCE will appear in court on Monday to seek a speedy court date, according to SCE spokesman Lewis Phelps.
On Sept. 1, SDG&E;'s board of directors unanimously rejected SCE’s $2.16-billion stock swap offer on Sept. 1. But SCE in recent weeks has used full-page newspaper advertisements to persuade SDG&E; shareholders that its merger offer holds heftier financial rewards than the previously announced merger that SDG&E; wants to complete with Tucson Electric Power.
Waiting for SEC Approval
SDG&E; is awaiting the Securities and Exchange Commission’s approval to send a joint proxy to SDG&E; and Tucson Electric shareholders. Those proxies are expected to be mailed out in the next few weeks.
According to court documents, SCE wants to prevent SDG&E; from completing the proposed merger with the coal-rich Tucson Electric. To do that, SCE is considering a stock exchange offer that would be made directly to shareholders, a special shareholders meeting that would allow SDG&E; shareholders to vote on SCE’s merger proposal, or a proxy solicitation aimed at defeating SDG&E;'s proposed merger with Tucson Electric.
Utility industry observers Friday described SCE’s actions as being highly unusual because state and federal statutes prohibit hostile takeovers in the highly regulated utility industry. “Big electric utilities have not been bought or sold (in hostile takeovers), at least not in modern times,” according to Michael Day, deputy general counsel for the state Public Utilities Commission.
In a related development, SDG&E; on Friday asked the Public Utilities Commission to rule that SCE’s acquisition of 1,000 shares of SDG&E; stock in recent weeks was illegal. SCE acquired the stock in order to gain access to SDG&E;'s mailing list, according to Phelps.
Violated a Statute
In the complaint filed Friday in San Francisco, SDG&E; argued that SCE violated a statute that prohibits regulated California utilities from acquiring stock in other regulated utilities without PUC approval.
SCE’s lawyers believe that the regulation does not apply to holding companies that own utilities, Phelps said Friday.
In San Francisco, the PUC is getting ready for what one regulator described as the “initial skirmish” between SCE and SDG&E.;
“Basically, the (law) states that a public utility can’t buy another share of stock without this commission’s authorization,” according to Day. “That’s the plain meaning of the statute.”
It is not clear, however, whether the statute applies to publicly traded holding companies that own various subsidiaries.
Past cases involving holding companies all involved relatively small water companies, “which get bought and sold more frequently,” Day said.
In those water company cases, commissioners ruled that the holding companies were, in fact, the “alter ego of the utility for the purposes of (the statute),” Day said. “The commission disallowed the purchases of stock and forced them to be reversed.”
But those cases would not necessarily mean that, under the statute, SCE in fact acted as Southern California Edison, Day said. Commissioners evidently will have to address that “factual question,” Day said.