UIL Director Votes With His Feet__»

With mergers and acquisitions popping up daily, it’s easy to forget that not everyone automatically agrees that a particular deal is a good idea.

We found a recent example in the 8-K that UIL Holdings Corp. (UIL) filed, where one board member opposed the deal so strongly that he resigned in protest.

The acquisition, announced May 25, involves UIL’s agreement to buy Connecticut Energy Corporation (CEC), which owns The Southern Connecticut Gas Company (SCG); CTG Resources, Inc. (CTG), which owns the Connecticut Natural Gas Corporation (CNG); and Berkshire Energy Resources, (BER), which owns The Berkshire Gas Company. All three companies are subsidiaries of Iberdrola USA, which is, itself, a subsidiary of Iberdrola SA (IBDRY). UIL will pay $1.296 billion in cash, less net debt of approximately $411 million; the final purchase price may fluctuate due to post-closing adjustments. The deal is expected to close in the first quarter of 2011, but the requisite waiting period must be met, and the Connecticut Department of Public Utility Control and the Massachusetts Department of Public Utilities must also approve the respective acquisitions.

UIL provides electricity and —energy related services in the New Haven and Bridgeport areas of Connecticut. After the deal closes, the company expects to be —a diversified energy delivery company with 694,000 utility customers.

The board member who opposed the deal was Marc Breslawsky, who served on the Compensation and Executive Development Committees. UIL’s bio on Breslawsky states that he’s a CPA who has served as a CFO and as a CEO of publicly traded companies; he also serves on three other boards, including The Brinks Company. Prior to the board’s vote on the deal in question, Breslawsky sent a resignation letter, stating:

“I hereby resign from the Board of Directors of UIL Holdings Corporation, effective immediately before the vote on the acquisition of any Iberdrola subsidiary. I do not do so lightly, but as you know I do not believe that moving forward with the acquisition of the Connecticut and Massachusetts gas businesses of Iberdrola USA, Inc. is in the best interests of UIL and its shareholders. In light of my disagreement with all of you on such an important subject, and in light of the time commitment that Board service has been taking and is likely to continue to take with the pendency of the acquisition and integration activities, I believe it is best for me to leave the Board at this time.”

In UIL’s 8-K, it offered its take on Breslawsky’s resignation as follows:

—The Company believes, based on Mr. Breslawsky’s statements, that his disagreement with the decision reflects concerns regarding shareholder dilution and the Company’s potential leverage.

The foregoing issues have been discussed by the Company’s board of directors, and after carefully considering both the potential risks and benefits of the proposed transaction, the Company’s remaining directors, while having great respect for the views of Mr. Breslawsky, are unanimously of the view that the expected benefits of the Iberdrola Deal outweigh its risks.

In due time, we—ll find out whether Breslawsky or the board assessed the merits and risks of the deal more accurately.


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