Algonquin has
Extended Multiple Proposals to Acquire Gas Natural
Gas Natural Tells Algonquin the Company is
"Not for Sale" and Refuses to Discuss a Proposed
Transaction
Through its Self-preserving Pursuit of an
Undefined and Uncertain Standalone Plan, Gas Natural Board is
Preventing Shareholders from Receiving an Immediate and Compelling
Premium for their Shares
Algonquin Urges Gas Natural Shareholders to
Demand that the Gas Natural Board Maximize Shareholder Value
through a Sale Process
Algonquin Encourages other Shareholders to
Withhold Support for Incumbent Directors and Value Destructive
Resolutions in Advance of the July 30,
2014 Annual Shareholders' Meeting
TORONTO, July 23, 2014 /CNW/ - Algonquin Power &
Utilities Corp. ("APUC") (TSX: AQN) today announced that it sent
the following letter to the Gas Natural Inc. (NYSE: EGAS) board of
directors:
July 23, 2014
Board of Directors
Gas Natural Inc.
8500 Station Street, Suite 300
Mentor, Ohio 44060
Dear Sirs:
As you know, our parent company Algonquin Power & Utilities
Corp. ("APUC"), currently owns approximately 4.9% of the
outstanding shares of Gas Natural. Over the past seven months we
have sent three letters and reached out numerous times to discuss a
potential acquisition of Gas Natural by Liberty Utilities Co.
("Liberty Utilities"). The proposed transaction would provide an
immediate and compelling premium to all Gas Natural shareholders.
We urge Gas Natural shareholders to exercise their rights by
insisting that the Board immediately commence a process to maximize
shareholder value through a sale of the company.
We have advised that Liberty Utilities is prepared to move
quickly to complete a transaction with Gas Natural that provides
superior shareholder value creation with low execution risk,
especially when compared to Gas Natural's poorly articulated and
highly uncertain standalone strategy.
Notwithstanding, with our parent company being a large holder of
Gas Natural stock, we share the interest of all
shareholders of Gas Natural in maximizing shareholder value. To
that end, we are supportive of a transaction structure that would
permit a broader sale process and the realization of more than
$13.00 per share should a higher
offer be made by another qualified party. Notably, however, the
only way such value can be delivered to Gas Natural shareholders is
for you to commence a process to maximize shareholder value through
a sale of the company.
LIBERTY UTILITIES IS A PROVEN OWNER OF
REGULATED UTILITY ASSETS WITH STRONG GROWTH AND RETURNS
APUC, the parent of Liberty Utilities, is a growing
distribution, generation and transmission utility company with
approximately $3.7 billion in assets
across North America, and which
operates through two primary business units: Liberty Utilities and
Algonquin Power Co. Liberty Utilities is a reliable, cost effective
provider of rate regulated water, electricity and gas distribution
and transmission utility services to more than 485,000 customers
across the United States. Liberty
Utilities has robust access to capital and a firm commitment to
investing in the utilities it owns.
Liberty Utilities continues to grow through strong organic
growth and capital reinvestment within our utility business and,
most importantly, accretive acquisitions. The Liberty Utilities
management team has a very strong track record of successfully
acquiring and consolidating regulated utility companies, which has
produced benefits for all stakeholders. In the last two and a half
years alone, Liberty Utilities has acquired natural gas
distribution utilities that provide regulated service to more than
285,000 customers in six states.
MULTIPLE ATTEMPTS TO PRIVATELY NEGOTIATE A
TRANSACTION WITH GAS NATURAL HAVE BEEN SUMMARILY REJECTED
Our multiple proposals regarding a potential transaction have
been consistently rebuffed without any negotiation or significant
discussion. On May 7, 2014, we sent
our most recent letter to the Gas Natural board in which we
expressed interest in acquiring all outstanding shares of Gas
Natural at a price of $13.00 per
share – a premium of approximately 40% to Gas Natural's share price
as of January 13, 2014, the day
before we approached the Gas Natural board regarding a transaction.
Importantly, the $13.00 per share
price of our proposal also exceeds Gas Natural's all-time high
share price of $12.35.
Unfortunately, you once again refused to engage in any
dialogue. In fact, your response letter stated unconditionally
that Gas Natural is "not for sale." We were, of course, taken aback
by such a response, given the challenges facing the company.
WE BELIEVE A SALE OF GAS NATURAL IS IN THE
BEST INTEREST OF SHAREHOLDERS, CUSTOMERS, REGULATORS AND
EMPLOYEES
We believe that the only viable value maximization strategy is a
sale of the company for the following reasons:
- Poorly articulated and uncertain growth strategy: Gas
Natural's management has failed to articulate a clearly quantified
growth strategy to deliver returns to shareholders superior to
those provided by our proposal. Whatever management's strategy may
be, we are confident that Gas Natural's relatively high cost of
capital and the multiple challenges created by the board and senior
management described below will continue to impair the ability to
deliver shareholder value under a standalone plan, certainly as
compared to the value creation available under our
proposal.
- Poisoned regulatory relationships: After conducting an
investigative audit of Gas Natural in 2013, the Public Utilities
Commission of Ohio (PUCO)
concluded that certain public utility subsidiaries of Gas Natural
had "severe organizational dysfunction" and openly questioned "the
judgment of the current management of [such companies] and whether
they are sufficiently responsible and capable to continue to manage
a public utility." As reflected by the significant loss of
Gas Natural's market value following the release of the PUCO's
findings, we believe that trust between a utility and its
regulators is a critical driver of value and that, once broken,
such trust is not easily or quickly reestablished, absent a
dramatic and fundamental change of the nature that a sale of the
company would offer.
- Inexperienced, nepotistic management team: On
May 15, 2014, Gas Natural announced
that its board of directors had appointed Greg Osborne as Chief Executive Officer. It is
our understanding that the board did so without having conducted
any formal executive search process. Greg
Osborne is the son of Richard
Osborne, the previous Gas Natural CEO, and does not have the
utility management experience that we believe is necessary to
address the significant challenges facing the company. We are
particularly troubled by his appointment given the deteriorated
relationship between state regulators and the company under the
leadership of his father, noted above, and the web of relationships
between the company and entities affiliated with Richard Osborne that have been a primary focus
of regulator concern. Greg Osborne
was, in fact, an officer of one or more of these entities during
the period in which the PUCO determined that dealings between these
entities and subsidiaries of the company were inappropriate.
- Self-admitted dysfunctional board dynamics: We believe
that Gas Natural is not focused on growth and creating shareholder
value, but rather on the discord that has plagued senior management
and the board. In response to public disclosure that Mr.
Richard Osborne "verbally assaulted
several board members and physically assaulted a member of the
board and the company's outside legal counsel," the board recently
acknowledged that its "ability to function properly" was impaired.
The board's lack of candor with respect to this discord makes it
impossible to know how long the shareholders of the company have
been left adrift, but this dysfunction does not appear to be a
recent development given the multitude of challenges now consuming
the company.
- Lack of transparency and candor: Gas Natural has on
several occasions, including with respect to our proposals to
acquire the company, failed to disclose important information to
the company's shareholders in a timely manner. The company did not
publicly acknowledge our acquisition proposals until more than a
month after solicitation by the board of shareholder support for
resolutions that the company has acknowledged would impede a sale
transaction. The board demonstrated a lack of candor in its delay
of the filing of information with the SEC regarding physical
boardroom altercations until after the deadline for shareholders to
submit director nominations had passed; we note that the only
change between the existing board of directors and the proposed
slate of directors is the replacement of Richard Osborne. And now, with the date of the
annual shareholders' meeting fast approaching, the board has failed
to disclose terms of a settlement agreement that we understand was
apparently reached between the company and Richard Osborne in respect of Mr. Osborne's
allegations that the board had violated its fiduciary duties.
- Alleged self-dealing by senior management and board
members: A shareholder filed a lawsuit in December, 2013,
accusing director and former Chairman and CEO Richard Osborne and director and former CFO
Thomas J. Smith of "breaches of
fiduciary duty and wholesale dereliction of their duties."
The lawsuit alleges that "knowing that trouble was imminent,
defendants Richard Osborne… and Thomas J.
Smith abused their possession of this non-public information
by unloading a massive amount of stock less than two weeks before
the 2013 [PUCO] order was published." Together with the findings of
the PUCO in such order, we find the pattern of alleged self-dealing
impossible to ignore. We also believe it is notable that these two
directors sold most of their holdings for $10.00 per share, which is well below the
$13.00 per share price of the Liberty
Utilities proposal that the board now claims is inadequate.
- Proposals to entrench the board and senior management:
The board has proposed adoption by the shareholders of a resolution
increasing – and in fact nearly doubling – the number of
authorized shares of the company, to permit the board to issue
shares without further shareholder approval. As stated in the proxy
materials first made public by the board on May 30, 2014 (a date which should be noted
occurs after the submission of all three of our acquisition
proposals, and merely three weeks following our most recent
acquisition proposal):
"This proposal [to increase the number of authorized shares] is not
being made in response to any hostile attempts by any third party
to obtain control of the company but the availability for issuance
of additional shares of common stock could enable our board to make
more difficult or discourage an attempt to obtain control of Gas
Natural. . . . As a result, authorizing additional common
shares may adversely impact shareholders who desire a change in
management and/or the board or to participate in a tender offer or
other sale transaction involving a change in control of Gas
Natural."
We are encouraging shareholders to assess these statements, and the
motivation of the board, in the context of the company's
disclosure, on July 21, 2014,
that the company had, in fact, received three unsolicited proposals
for the acquisition of the company from us before the date
the proxy materials were first made public. We are also
encouraging shareholders to note the widespread opposition
expressed by shareholder rights groups to anti-tender offer
proposals of this nature on the basis of negative impact to
shareholder value.
Your refusal to consider a sale of the company in favor of the
pursuit of an undefined and uncertain standalone plan that
preserves control of the company by existing directors and senior
management ignores the opportunity to rapidly rectify the issues
noted above through a business combination.
Liberty Utilities' interest in acquiring all of the shares of
Gas Natural for $13.00 per share
today represents a premium to Gas Natural's share price at any time
over the last several years and we believe that it delivers far
greater value than Gas Natural can reasonably expect to
deliver on a standalone basis.
We are confident that Liberty Utilities' scale of operations and
robust access to capital will allow the customers, regulators and
employees of the company to reap the rewards of participation in a
larger, more capable combined entity. Liberty Utilities is a
unique, compelling and obvious partner for Gas Natural, and would
be a willing buyer of all of the outstanding shares of Gas Natural
at $13.00 per share.
GAS NATURAL SHAREHOLDERS DESERVE A BOARD AND
MANAGEMENT TEAM COMMITTED TO ENHANCING VALUE FOR
SHAREHOLDERS
We believe that shareholders deserve a board willing to consider
all opportunities to maximize value. As we have stated, our
preference is to move forward with a speedy and friendly
transaction. Unfortunately, our attempts to engage with you and
your management team have been met with little more than cursory
dismissals. Your response has been, instead, to propose the
adoption of resolutions that will further entrench the board and
senior management and facilitate continued disregard for the best
interests of the company's shareholders.
In light of your continued refusal to engage in a productive
dialogue about the merits of a transaction to maximize shareholder
value, we will be encouraging all shareholders to consider what you
have failed to consider: Maximize Value For Gas Natural's
Shareholders Through A Sale Of The Company.
We intend to interact with the company's other shareholders to
encourage them to urge you to commence a sale process. If you
fail to take action, we will ask that shareholders join us in
voting against the incumbent board of directors and the value
destructive anti-tender offer resolutions in advance of the
upcoming July 30, 2014 shareholders'
meeting.
Sincerely,
David Pasieka
President, Liberty Utilities Co.,
A subsidiary of Algonquin Power & Utilities Corp.
The Opinion and Order from the Public Utilities Commission of
Ohio that is referenced in this
press release is available at:
http://dis.puc.state.oh.us/TiffToPDf/A1001001A13K14B00651E38055.pdf.
About Algonquin Power & Utilities Corp.
Algonquin Power & Utilities owns and operates a diversified
$3.7 billion portfolio of regulated
and non-regulated utilities in North
America. The regulated utility business provides water,
electricity and natural gas utility services to over 485,000
customers through a portfolio of regulated generation, transmission
and distribution utility systems. The non-regulated electric
generation subsidiary has invested in renewable energy and thermal
energy facilities representing more than 1,100 MW of installed
capacity. Algonquin Power & Utilities Corp. delivers continuing
growth through an expanding pipeline of renewable power and clean
energy projects, organic growth within its regulated utilities and
the pursuit of accretive acquisition opportunities. Common shares
and preferred shares are traded on the Toronto Stock Exchange under
the symbols AQN, AQN.PR.A and AQN.PR.D. Visit Algonquin Power &
Utilities Corp. at www.AlgonquinPowerandUtilities.com and follow us
on Twitter @AQN_Utilities.
SOURCE Algonquin Power & Utilities Corp.