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Wednesday, May 12, 2010

Is $32 fair for each Pennichuck share?

Pennichuck Corp.’s largest shareholder thinks that if the city of Nashua buys the company outright, the acquisition price should be $32 a share – a figure, the company said, that would be $65 million cheaper than taking the waterworks by eminent domain. But the price is also a dollar higher then the price the shares were selling for Thursday.

The company disclosed the latest research report, by Gabelli Co., the company’s largest shareholder. The company released the report without endorsing it during a presentation at its annual meeting on Wednesday.

Currently, the city and the company are negotiating a deal in light of a state Supreme Court decision in March upholding a Public Utilities Commission ruling that the city could take the waterworks, but only at a $243 million price tag, with $40 million to be put into a mitigation fund to protect customers of two other smaller utilities owned by Pennichuck.

That price, the company noted, would be without about 450 acres of undeveloped lands owned by Pennichuck.

The Merrimack-based company estimated that a takeover would cost the city $45 a share, and the company would suffer because it would have to liquidate and sell off the land at fire-sale prices.

The deadline to appeal the decision has passed. The city must submit to the PUC’s executed operating contracts by June 4, according to the company’s quarterly filing with the SEC.

There’s also a June 23 deadline to proceed with the taking, dating 90 days from the Supreme Court decision.

The eminent domain battle company cost the $99,000 last quarter, slightly less than the $118,000 it spent during the first quarter of last year, the company said.

Altogether, Pennichuck earned a slight profit for the quarter – $75,000, or 2 cents a diluted share, compared to a $68,000 loss in the first quarter of 2009.

The main reason behind the turnaround was an increase of $400,000 in revenues, bringing the total to $7.4 million, primarily due to a water revenue increase. Water usage was flat, but the PUC granted the company a rate increase in August 2009, so the increase was mostly due to higher water rates paid by the company’s customers.

Pennichuck’s share prices closed Thursday at $22.25, a decline of 25 cents.