National Fuel asks shareholders to reject New Mountain's nominees

By Lisa Kerner

Charlotte, N.C., Jan. 11 - National Fuel Gas Co. once again reached out to its shareholders with a Jan. 11 letter regarding the "disruptive proxy contest" launched by a group led by the hedge fund New Mountain Vantage Advisers, LLC and its principal, Steven B. Klinsky.

The letter was included in a form 8-K filing with the Securities and Exchange Commission. A similar letter was sent to shareholders on Dec. 28.

National Fuel urged shareholders to reject New Mountain's slate of directors for election to the company's board of directors.

National Fuel is seeking the re-election Robert Brady, Rolland Kidder and John Riordan to its board.

It was previously reported that New Mountain will nominate David DiDomenico, F. Fox Benton III and Frederic Salerno for election to the company's board of directors at National Fuel's 2008 annual meeting.

"We believe that, if New Mountain's candidates are elected, they will pursue a course of action that may serve New Mountain's short-term interests, but would harm the majority of our shareholders," National Fuel stated in the latest letter.

The company notes its record of "extraordinary returns" to its shareholders of 32% for the year ended Sept. 30, compared with the S&P 500's 16% return and the S&P 400 Utilities' return of 19%.

For the 10-year period ended Sept. 30, National Fuel had a 214% total return to shareholders, compared with 89% and 185% for the S&P 500 and S&P 400 Utilities, respectively.

According to National Fuel, New Mountain's goal is to liquidate the company by "selling off the ownership of important pieces of a successful integrated energy company."

National Fuel also took exception to New Mountain's failure to share the Schlumberger data and consulting report, "the very document they cite as the foundation of their principal claim." In addition, National Fuel disagrees with New Mountain's claim that the company has not considered the investor's recommendations, despite National Fuel's public responses.

National Fuel also reminded shareholders that while New Mountain complains about the company's staggered board and a shareholder rights plan, these have effectively "prevented New Mountain from simply buying more shares and seizing effective control of your company in a single stroke."

In November, New Mountain reiterated its recommendation that National Fuel sell its non-core operations for proceeds of an estimated $450 million.

New Mountain also wants National Fuel to eliminate the 10% poison pill and its staggered board.

When New Mountain announced its nominees in October, it owned 8,078,606 shares, or 9.7%, of the Williamsville, N.Y., diversified energy company.

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