Director of SDG&E; Resigns to Protest Merger Approval

Charles (Red) Scott, chairman of La Jolla-based Intermark, resigned Thursday as a director of San Diego Gas & Electric to protest Wednesday’s vote to merge SDG&E; into SCEcorp’s Southern California Edison subsidiary.

Scott voted against the merger “because I do not believe that selling out today for a premium is in the best interest of SDG&E; or its shareholders,” according to a statement released Thursday by his attorneys.

As proposed, the merger would create the nation’s largest electric utility, with 4.8 million customers. The merger now must be approved by SDG&E; and SCEcorp shareholders, as well as state and federal regulators.

Scott, a 60-year-old businessman who joined SDG&E;’s board in 1983, disagreed with legal advisers who suggested that directors “had no choice but to approve the Edison offer and that any other decision would result in personal liability to the directors.”

“I reached exactly the opposite conclusion,” said Scott, who based his vote on “35 years of business experience, my due diligence, my commonsense judgment and my evaluation of the bias of certain advisers who told us that we had no choice.”

“I cannot believe that any court in the land would impose liability on a completely independent director who acted on behalf of his company and its shareholders on this basis,” Scott said.

SDG&E; hired Skadden, Arps, Slate, Meagher & Flom, a major New York-based corporate law firm, to advise directors and officers on legal issues involved in the proposed merger.

SDG&E; Chairman Thomas Page said that he had not expected the resignation and that Scott’s statement represents “the personal views of one director, and it is not appropriate to discuss the deliberations of the board.” Eight board members remain.

Page maintained that the board’s options were somewhat restricted because “this all started out and still is a hostile acquisition.” To that end, SDG&E;’s board determined that the SCEcorp offer was “fair, compelling, adequate or whatever,” Page said. The board then dealt “with the other attendant issues.”

“The board’s primary responsibility is concern for the investors,” Page said. “And that issue was dealt with first. If you couldn’t satisfy (shareholder) interests, then there were no other issues, no other constituencies before you.”

In his statement, Scott echoed a growing concern in San Diego County that SDG&E;’s directors had failed to give adequate consideration to “the good will of the communities in which SDG&E; operates.”

Page said he expects growing concern in San Diego that Edison will not be as accessible as the locally based utility.

“I share the exact same concerns, and the comfort I can give is that we will . . . (undergo) a very rigorous regulatory process that is open and in which everyone who wishes may participate,” Page said.