Pennichuck price has familiar ring
For seven long years, a standoff over price has kept the city of Nashua and its privately owned water company from working out a peaceful sale.
Through court battles, closed-door settlement talks and the city’s long-running attempt to take Pennichuck Water Works by eminent domain, the value of the company has remained a contentious sticking point.
Now, it appears some of that fighting may have been for naught.
In an attempt to push a stock sale of parent company Pennichuck Corp. as a resolution to eminent domain, the company’s largest group of investors, Gabelli & Co., is now publicly floating a price it believes is fair for the Merrimack-based company: $31 a share.
Ironically, that $31 figure is “very similar” to the price Nashua offered and Pennichuck turned down two years ago in private settlement talks, according to former Mayor Bernie Streeter, who is more at liberty to discuss the case now that he’s no longer holding office.
“The offer we made two years ago was reasonable and very close to what they’re talking about now,” Streeter said in an interview Thursday. “They should have said that two years ago when we made a very fair offer.”
This is the latest development in a case that is headed to the New Hampshire Supreme Court, barring such a stock sale.
The city thinks it should have control over the local water supply, but Pennichuck, a more than 150-year-old company, has long maintained it has been an excellent steward of the water system.
Pennichuck is careful to say that the figure of $31 a share is Gabelli’s number, not its own, although Gabelli opinion does have some sway because it recently acquired two seats on the company’s board of directors. The company hasn’t publicly named a price it thinks is fair.
But at Pennichuck’s May 6 annual shareholders meeting, chief executive officer Duane Montopoli used the figure to illustrate why a stock sale would be better for both sides than to continue the eminent domain fight. It may have been the first time he made a public statement supporting a sale.
“I was, of course, delighted,” said Barbara Pressly, a Nashua resident and longtime supporter of a city-owned water company, who has been granted intervener status in the eminent domain case. “It was sort of one of those out-of-body experiences.”
Pressly and other city supporters have long advocated for a purchase of Pennichuck Corp., not just Pennichuck Water Works.
Less than a week after the shareholders meeting, on May 12, Gabelli issued a report saying it believes the city – which initiated the eminent domain in 2002 – is now the one that’s delaying an out-of-court settlement that would benefit both investors and the city.
“While Pennichuck appears to be willing to sell itself to Nashua, the city continues to drag its feet,” said the report, authored by research analyst Tony Fritz. “For the benefit of all stakeholders, the city of Nashua should focus on a negotiated solution rather than continuing to waste public resources through the appeals process.”
In response, Mayor Donnalee Lozeau released this statement Friday:
“As previously stated, the city believes the $203 million value for Pennichuck Water Works proposed by the New Hampshire Public Utilities Commission is too high. We have already filed our appeal of the valuation issue with the New Hampshire Supreme Court.
“Should we prevail on appeal, we believe the cost to our citizens will be substantially less than the ‘private market value’ of $31 per share proposed by Gabelli & Company.”
Lozeau’s statement went on to say that Gabelli has proposed various liquidation values for Pennichuck in the last year and that the city isn’t inclined to rely on the private market value proposed by a major shareholder.
Neither Pennichuck nor the city will comment on whether private settlement negotiations are taking place. However, Lozeau has made it no secret that she is no fan of takeovers by eminent domain.
The last year has produced big developments in the eminent domain saga, which the city initiated in 2002 after learning that Pennichuck had agreed to be acquired by an out-of-state company. The city wanted to keep control of the water supply local, as well as to protect land surrounding the watershed from further development. The deal later fell through.
In July 2008, the New Hampshire Public Utilities Commission ruled in favor of the city, setting the price for eminent domain at $243 million. Of that amount, $40 million was a mitigation fee for damage to Pennichuck’s four other subsidiaries.
Pennichuck Corp. is made up of five subsidiaries, four of which are in the business of water distribution and operation. The fifth is a real-estate development company.
If the dispute ends up being resolved through eminent domain, the city would take control of just Pennichuck Water Works, the subsidiary that owns the water system in Nashua and some of the surrounding towns.
In the event of a stock sale, Nashua would take control of Pennichuck Corp. in its entirety, including the land surrounding the water supply that it wants to protect.
Pennichuck has appealed the PUC’s July ruling to the Supreme Court, and the court has accepted the case. Nashua has also filed an appeal with the high court to challenge the $243 million sale price.
A hearing date hasn’t been set.