(Bloomberg) — Activist investor Carl Icahn is threatening to take legal action if Southwest Gas Holdings Inc.’s leadership sells stock in the company for less than the $75 a share he has offered to take it over.
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In a letter Thursday to the company’s board of directors, Icahn repeated his offer at that price to either buy the shares he doesn’t already own or help finance a $1.97 billion acquisition of pipeline company Questar — a deal he opposes.
He said he’d hold the company accountable if it sold stock to help fund the Questar deal for less than what he’s offered. Southwest Gas’s shares closed Wednesday at $70.76 in New York.
“We will pursue every avenue available to seek legal redress and to compel SWX directors to fully discharge the fiduciary duties they owe to all stockholders,” Icahn said in the letter, referring to the company by its stock symbol.
Icahn, who disclosed a stake in Southwest Gas last month, argues the company is overpaying for Questar and has been critical of the roughly $1 billion it intends to raise in equity and equity-linked securities to help finance the transaction. Those shares should be offered first to existing investors to avoid dilution, said Icahn, who has offered to provide that financing himself.
“We may also consider bringing legal actions against any purchasers in such a ‘cheap stock’ transaction for aiding and abetting the breach of fiduciary duties by the SWX board at the expense of SWX stockholders,” Icahn wrote.
A representative for Las Vegas-based Southwest Gas declined to comment on Thursday’s letter, a copy of which was reviewed by Bloomberg News.
Southwest Gas urged investors this week to reject Icahn’s attempt to buy the remainder of the company, arguing his tender offer undervalues the company and is highly conditional with no certainty of completion.
Icahn has separately pushed for the company to sell its Centuri Group construction business to help stabilize its balance sheet, and has also threatened to replace the board with his own nominees.
Southwest Gas has so far opposed Icahn’s overtures and this week said it planned to appoint two new directors and replace its chairman with current board member Robert Boughner at its annual general meeting. Chief Executive Officer John Hester said the company would consider selling a stake in Centuri to help finance the pipeline deal, along with other options.
Icahn wrote in Thursday’s letter that he’d support the sale of a 19.9% stake in Centuri for $500 million, but not at a lower price.
“We also would support other value-maximizing ideas so long as they achieve the highest and best values for the company,” Icahn said. “Our point is simple — you have a fiduciary duty to try to maximize value for the company and its stockholders.”
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