SCE Bid Is Hard to Refuse, SDG&E; Chief Tells Board

San Diego Gas & Electric Chairman Thomas Page suggested Tuesday that SDG&E;’s board members would be hard-pressed to reject SCEcorp’s merger offer when they meet today in San Diego. During a lengthy noontime meeting with SDG&E; managers in San Diego, Page described SCE’s initial $2-billion stock swap merger offer as “very adequate and very fair” to SDG&E; shareholders. SCE’s $2.4-billion bid, made Nov. 23, is even more “compelling . . . (and) very financially attractive” to shareholders, Page said, according to a description of the meeting by SDG&E; spokesman Maurice Luque.

But Page disputed a newspaper report Tuesday that five of SDG&E;’s nine board members had already decided to accept the $2.4-billion stock swap merger. He maintained that SDG&E;’s board is “heatedly discussing” the offer that would merge SDG&E; into SCE’s Southern California Edison subsidiary, Page said.

The proposed merger would create the nation’s largest investor-owned utility with 4.8 million customers. In addition to SDG&E;’s board, the proposed merger also must be approved by SDG&E; shareholders and various state and federal regulators.

During Tuesday’s meeting, Page acknowledged that he and three other SDG&E; executives would receive employment contracts if the merger takes place. Page would serve as vice chairman of Edison’s San Diego division. SCE also has offered employment contracts to SDG&E; vice president Lee Haney, chief legal counsel Stephen Baum and Margot Kyd,a vice president who recently served as SDG&E;’s treasurer.

Profitable Utility

SDG&E; negotiated the employment contracts in order to “provide continuity” should the merger occur, Page said. The four SDG&E; executives will “be ensuring that the merger is carried out very smoothly during the time it takes to get (it) done,” Page said.

During the wide-ranging meeting, Page suggested that he had known for several years that SDG&E; was unlikely to emerge unscathed from an ongoing utility industry consolidation.

SDG&E;, a profitable utility that has been cutting electric rates for several years, has been “ripe for a hostile takeover,” Page said. Utility industry analysts have been preparing lists of takeover candidates for several years and SDG&E; was “on everybody’s list,” Page said.

An SDG&E; survey of Southwestern utilities conducted several years ago showed that only two companies--Edison and Tucson Electric Power--were healthy enough to consider as candidates, Page said. “SDG&E; didn’t want to get in bed with someone who’s sick,” Page said.

Anticipated Opposition

SDG&E; in June announced a planned merger with Tucson Electric, an Arizona utility with plenty of excess electricity and an impressive transmission line grid. But SDG&E; and Tucson Electric abandoned that proposed deal Nov. 1, blaming anticipated strong opposition from SCE during upcoming regulatory hearings.

Tucson Electric “didn’t want to join with us to fight off SCE,” Page said.

SCE was a relative latecomer to the consolidation wave because its officers and directors had been “distracted” by developments at the San Onofre nuclear power plant and a successful but time-consuming fight to gain regulatory approval of the holding company that now houses SCE’s regulated and non-regulated businesses, Page said.

When those matters were taken care of, SCE “turned its attention toward SDG&E;,” Page said.