SDG&E; Shareholders Approve Merger Plan

San Diego Gas & Electric Co. shareholders Tuesday endorsed a $2.4-billion stock swap that would blend the utility into Southern California Edison and create the nation’s largest gas and electric utility.

SDG&E; officials said that, among shares that were voted, the proposed merger drew support from at least half of the utility’s common stockholders and two-thirds of its preferred and preference shareholders.

Shareholders of SCEcorp, Edison’s Rosemead-based parent company, are expected to approve the merger during a meeting Thursday. The merger also must be approved by various regulatory agencies, including the California Public Utilities Commission and the Federal Energy Regulatory Commission.

Adjournment Feared

Tuesday’s annual shareholders meeting generated some tense moments for SDG&E; executives because votes were still being tabulated as the 11 a.m. meeting opened. Chairman Tom Page began the session by warning the nearly 900 shareholders in attendance that the slow-moving vote count might force an adjournment.

Shortly after 1 p.m., however, executives announced that the merger had been approved by margins required in the corporation’s bylaws. Official results will be made public this afternoon, according to Jennifer Lewis, SDG&E;’s manager of investor relations.

The vote count was delayed because a New York-based proxy solicitation company was slow to forward proxies to SDG&E;, Lewis said.

By coincidence, Tuesday’s shareholder vote to fold SDG&E; into the much larger Edison came on SDG&E;’s 108th birthday. That irony was not lost on a handful of SDG&E; shareholders, who peppered Page with questions about the wisdom of a merger with Edison.

One stockholder pointed to the “firestorm of protest” the merger has generated in San Diego County. The shareholder questioned whether the merger is really necessary because “SDG&E; has made steady, modest progress over the past few years.”

New Sources Needed

Page defended the proposal, saying that alone, SDG&E; would not be able to meet the rapidly growing demand for electricity in San Diego and southern Orange counties. “Our rates were going to be trending upward” for SDG&E;’s 1 million customers unless new sources of electrical generation were secured, Page said.

SDG&E;’s board approved the proposed merger Nov. 30, largely because it will give SDG&E; access to Edison’s vast electric transmission grid and excess electricity generated by Edison plants.

Page repeated his previous claim that the merger with Edison became a necessity after SDG&E;’s proposed merger with Tucson Electric Power in Arizona fell apart. He expressed doubt that that merger will be revived if the Edison merger falls apart.

According to the merger agreement, SDG&E; shareholders will receive 1.3 shares of Edison stock for each share of SDG&E.; That swap provides a 23% premium for each share of SDG&E; common stock, according to the utility. The swap would also boost SDG&E; common stock dividends by 24% and boost the book value per share of each SDG&E; common share by 29%, according to the company.

SDG&E; closed up $.25 Tuesday, at $37.50. SCEcorp closed up $.25 at $32.

Pickets Outside

While SDG&E; shareholders gathered for the meeting at the Sheraton Harbor Island East, a handful of SDG&E; employees picketed outside.

“We’ve got about 50 people here,” said Dave Moore, business manager for Local 465 of the International Brotherhood of Electrical Workers. “They think it’s important for shareholders to know what we feel about this merger.”

The protesters, who carried anti-merger signs and wore black armbands, gathered at the hotel about 9:30 a.m.

“I think that Tom Page and the board are selling all the employees down the road,” complained John Minto, an SDG&E; employee for 31 years. “Page and the board were against this merger at the beginning, but then the pot got richer for them and they changed their minds.”

Minto was referring to lucrative employment contracts that Edison offered Page and other key SDG&E; executives.