(Bloomberg) -- Southwest Gas Holdings Inc. rejected a takeover attempt by billionaire Carl Icahn, saying his unsolicited tender offer undervalues the U.S. utility. Icahn fired back with a heated letter, calling the company's response “the height of hypocrisy.”
The escalating dispute makes a proxy fight more likely as “the company and Icahn continue to trade blows,” analysts at JPMorgan Chase & Co. said in a research note Wednesday. It will also focus more attention on how Southwest plans to finance its pending $2 billion deal to buy Questar Pipeline Co., the transaction that set off the fight last month with the billionaire activist investor.
Icahn, who owns about 5% of Southwest Gas shares, published an open letter to Southwest shareholders Tuesday afternoon calling the company's plan to buy Questar “an ill-advised acquisition that will provide NO synergies and NO growth!” He offered on Oct. 27 to buy all outstanding Southwest shares for $75 a share.
After a review, the board of Southwest Gas unanimously rejected Icahn's offer, saying it “is inadequate, undervalues the company, is structurally coercive and is not in the best interest of all of its stockholders.” The company is advising shareholders not to sell their holdings into the offer.
Related news: Icahn Makes Offer for Southwest Gas Shares in Pipeline Fight
The company also said Tuesday that it would consider selling its Centuri Group construction unit to finance the pipeline deal.
“That is one of the things we're looking at,” Chief Executive Officer John Hester said during a conference call. “It's something that our board frankly has looked at probably annually for the past several years and it certainly would be one way of accomplishing some of that financing.”
Icahn and Southwest Gas have been locked in a public spat since October when the activist investor revealed his 4.9% stake in the Las Vegas-based company. He blasted Southwest Gas executives for “egregious errors” and said their plan to buy Questar was a mistake. Southwest defied Icahn and went ahead with plans to buy Questar for about $2 billion.
Icahn later called on Southwest to sell Centuri and use the proceeds to shore up its balance sheet.
The company also named Robert Boughner as the next chairman, effective at the annual meeting.
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