Sandell Objects to Southern Union's New Compensation Agreements

Believes Agreements are Entrenching and Further Evidence of the Need for Shareholder Oversight on the Board 


NEW YORK, Sept. 3  /PRNewswire/ -- Sandell Asset Management Corp. ("Sandell"), the largest individual shareholder of Southern Union Company ("SUG" or the "Company") with ownership of 9.9% of the shares outstanding, noted an 8-K filing by the Company late Thursday afternoon before the Labor Day holiday weekend. This filing, without an accompanying press release, detailed generous new compensation agreements entered into with the top five executives and 20 other officers at the Company.  These agreements provide for severance payments to the top officers regardless of whether a change of control occurs and even more generous payments in the event of a change of control at SUG.  We strongly object to these agreements for the following reasons:

1. This form of compensation is not tied to performance by the executives. In fact, we believe it is a disincentive since the executive is no longer required to perform in order to be lavishly compensated and can only be replaced at significant cost to shareholders

2. In the event of a change-of-control, these contracts are a direct transfer of value from shareholders to already highly-paid executives at SUG who have received generous grants of equity which were supposed to align the interests of executives and shareholders

3. In the case of Messrs. Lindemann, Herschmann and Ms. Gaudiosi, the bonus amounts are inflated by the outsized "special transaction bonuses" they received for completing the Sid Richardson acquisition, adding "insult to injury" for shareholders in our opinion

4. Based on the limited disclosure in the 8-K filing, Sandell believes the total value of compensation payable to the executives covered by the new agreements could exceed $100 million with over $60 million payable to Mr. Lindemann and Mr. Herschmann in certain circumstances.

Sandell believes this type of outsized, non-performance based compensation is a clear sign that SUG's Board of Directors does not possess the necessary level of independence from senior management to prevent what we believe is a clear misappropriation of shareholder value.  These actions raise serious concerns with respect to the exercise of fiduciary duties by the board and we believe the board and compensation committee should be held accountable for their decisions by shareholders for this type of "rubber stamp" activity. This latest action firms our resolve that change is needed on the board of SUG.  In this regard, Sandell continues the process of identifying potential candidates for nomination to the board of SUG in order to improve the composition and function of this board which we do not feel is acting in the best interest of shareholders.

Tom Sandell, the CEO of Sandell stated: "Southern Union shareholders should be outraged at this clear entrenchment device designed to transfer value to SUG's already well-compensated management, especially during a time period where the Company's shares are underperforming its peers and management has done nothing to improve value for stakeholders other than themselves.  The only positive effect may be that management is now more motivated to sell the Company, which we have already publicly asked them to do."

Sandell Asset Management Corp. is a multi-billion dollar global investment management firm, founded by Thomas E. Sandell, which focuses on global corporate events and restructurings throughout North America, Continental Europe, the United Kingdom, Latin America and the Asia-Pacific theatres. Sandell frequently will take an "active involvement" in facilitating financial or organization improvements accruing to the benefit of investors. 

DATASOURCE: Sandell Asset Management Corp.



CONTACT:  Mr. Tom Sandell, Chief Executive Officer of Sandell Asset

Management Corp., [phone]

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