Biggest shareholder calls for Southern Union sale

In a letter filed with the Securities and Exchange Commission, the head of Sandell Asset Management Corp. accused Southern Union's management of "poor performance, outsized compensation and complacency towards value creation."

The letter, signed by Sandell Chief Executive Thomas Sandell, blames Southern Union management and board members for failing to achieve goals of the company's 2007 strategic plan or boost its slumping stock price.

Houston-based Southern Union has been approached more than once about a possible sale in the past two years, Sandell said, and a buyer likely could be found. He estimates the company could fetch $32 to $42 per share.

Southern Union shares have tumbled nearly 25 percent in the past year, closing Wednesday at $25.13 apiece.

Sandell Asset Management launched a proxy fight against Southern Union in 2006, but withdrew its slate of board nominees after the gas company issued the 2007 plan, which included a proposal to spin off some of the company's assets and return cash to shareholders.

"Thus far, none of those goals have been met in substance, and we strongly question your level of actual commitment to them in the first place," Sandell wrote in the letter.

A representative for Southern Union declined to comment about the details of the letter.

"We have received a letter and are analyzing it," spokesman John Barnett said.

Should the company not be sold, Sandell is calling for splitting the roles of chairman and CEO and the hiring of "an experienced energy CEO." He also wants the company to outline a detailed plan to spin off many of its assets, commit to returning a minimum level of cash to shareholders and replace the majority of its board.