HELENA - Some large NorthWestern Corp. shareholders are accusing the South Dakota-based electric and natural gas utility of not seriously considering buyout offers because senior managers want to keep their jobs.
The company's largest shareholder said this week that NorthWestern tried to buy out it and two other large shareholders last month in a move it said was intended to quiet criticism of the board for not seriously considering takeover approaches.
NorthWestern has been offered a buyout from a coalition of Montana cities that want a public utility in the state, while another South Dakota utility has a merger offer on the table.
NorthWestern, forced into bankruptcy in 2003 to rid itself of debt and nonutility companies, has been the subject of scrutiny in Montana since buying electricity and natural gas transmission facilities from the former Montana Power Co.
Harbert Distressed Investment Master Fund, which owns a 21.2 percent stake in the utility, sent a letter to the company Tuesday saying chief executive Mike Hanson asked it and two other large shareholders in November to sell their shares - and guaranteed NorthWestern would ensure they got a good price.
"We believe that this offer to use the assets of all shareholders to make a payment to only a few large shareholders was in large part intended to substantially dilute our ability to be an advocate for shareholder value," the letter from Harbert vice president Philip Falcone says.
The letter also says NorthWestern adopted a so-called "poison pill," to protect management "intent on entrenching itself at all costs." A "poison pill" allows a company to prevent a hostile takeover.
NorthWestern took issue with Harbert's statement.
"Harbert's letter mischaracterizes the board's intent and actions over the process," said company spokeswoman Claudia Rapkoch. "We are currently reviewing all alternatives to maximize shareholder value, including Black Hills' proposal."
Rapkoch said the offer to help Harbert sell its shares could have been done with financing options that didn't hurt other shareholders.
A second large shareholder, Franklin Mutual Advisers, released a letter Friday that said NorthWestern executives are hindering potential deals "as nothing more than a way for existing management to further entrench itself and to perpetuate its role with the company and the economic benefits that go along with it."
Both of the large shareholders singled out the Black Hills merger offer over a deal from Montana Public Power Inc. MPPI is the coalition of five Montana cities that has offered to buy the company for $32.50 a share, or $1.18 billion. The Black Hills offer was stock in the combined company worth $33 to $35 per share. NorthWestern shares traded at $31.61 Friday, up from the roughly $25 a share when it emerged from bankruptcy in 2004.
Harbert and Franklin own almost a third of NorthWestern shares.
Harbert said it has hired MacKenzie Partners Inc. to help it communicate with other stockholders about the deals.
"We believe NorthWestern's Board and management have pursued a policy of rejecting bona fide offers to merge or sell the company regardless of the impact on shareholder value and the well-being of the company," Falcone wrote in the letter, which was filed with the Securities and Exchange Commission.
Late last month, a Michigan pension fund that owns shares in NorthWestern filed a lawsuit against the company in South Dakota, alleging it violated its duty to shareholders by stifling offers to buy the company.
The lawsuit, filed by the City of Livonia Employees' Retirement System, says NorthWestern "engaged in clandestine maneuvering to induce a bidder which would agree to NorthWestern's senior insiders retaining their positions."
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