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Monday, June 13, 2011

Utility vote has Nashua at last step

Speak now, shareholders, or forever hold your peace.

The second big step in the city’s latest – and, most likely, last – attempt to buy Pennichuck Corp. takes place Wednesday, when shareholders convene at the company’s headquarters to vote yea or nay on the $29 per share sale.

Two-thirds of shareholders must say yes for the deal to go forward. Then, the final step is approval by state regulators after a set of hearings in July. That process could take months.

The sale is expected to be final by year’s end, leaving the city of Nashua as the sole shareholder of Pennichuck Corp.

In November, city officials reached a historic deal to take ownership of Pennichuck, the private company that owns the local water supply. The $200 million deal ended an eminent domain fight that spanned eight years.

Nashua’s Board of Aldermen approved the deal in January, in the first of three steps.

Even if Pennichuck doesn’t get two-thirds of shareholder approval Wednesday, the deal won’t go down the drain. Pennichuck executives have two chances to get the vote they’d like from shareholders.

“You take the vote and if the vote doesn’t do the job … we would have the right to adjourn the meeting and try to get the votes,” Pennichuck CEO Duane Montopoli said.

“We don’t expect that to be a problem,” Montopoli said, but it’s nice to have the option.

The meeting takes place at the company’s Merrimack headquarters, 25 Manchester St., at 10 a.m. It is open to anyone who owns at least one share of the company.

Shareholders don’t actually have to be there to vote; they have the option of voting on the Internet or by phone prior to the meeting.

“Many votes have been cast already,” Montopoli said.

Montopoli declined to say how many votes Pennichuck has received or how many have been cast in favor of the deal.

The votes that have come in so far are mostly from individual shareholders; institutional shareholders rarely vote until right before the meeting, Montopoli said.

The city and Pennichuck have battled for control of the water supply since 2002, when Nashua officials initiated eminent domain proceedings after learning Pennichuck planned to sell to an out-of-state company. That sale fell through, but the city moved forward.

The city was also concerned that Pennichuck was selling off land surrounding the watershed for development, and officials said they wanted to own that land to protect the local water supply.

In 2008, the Public Utilities Commission ruled that Nashua could take the utility by eminent domain for $203 million, plus a $40 million mitigation fee for damages to Pennichuck’s sister companies, but the city said that price was too high.

Both sides appealed to the state Supreme Court: Pennichuck wanted the decision reversed and Nashua wanted a lower price.

Last March, the court backed all of the PUC’s 2008 decisions, which sparked a third round of private settlement negotiations in as many years.

Those negotiations, unlike so many before, were successful. City and Pennichuck officials jointly announced Nov. 11 that they had reached a deal.

Nashua will buy all shares of Pennichuck stock for $29 each, for a total of $138 million, and assume $60 million in Pennichuck debt.

Pennichuck shares are currently trading around $28.50, although the stock price got a big boost from the announcement of the sale and has remained high since that day.

The city plans to keep Pennichuck’s staff in place, with the exception of CEO Montopoli, chief financial officer Thomas Leonard and general counsel Roland Olivier.

They will receive a combined severance package of $1.46 million, which had been previously negotiated with the company’s board of directors.

Consultant John Patenaude, who advised the city through its efforts to negotiate a stock purchase of the water company, has been named interim CEO. Patenaude would serve no longer than three years and receive an annual salary of $190,000.

Ashley Smith can be reached at 594-6446 or