HOUSTON — Texas Eastern Corp.'s board of directors unanimously rejected Sunday a $2.6-billion cash offer from Coastal Corp., calling it "clearly inadequate."
Coastal announced Jan. 16 that it was making a cash tender offer of $42 a share for all of Texas Eastern's outstanding common shares. Since then, Texas Eastern's stock has soared, closing Friday at $48 a share.
The tender offer is set to expire on Feb. 14.
In a special board of directors meeting Sunday, Texas Eastern's board was told by financial advisers that they should wait for a better offer.
Dennis R. Hendrix, Texas Easten's president, said Coastal's offer "is clearly inadequate." He said the board's actions are designed to protect shareholders from "pressure tactics designed to stampede them into a decision before they can service a better offer."
Hendrix added that the board's decision in no way prevents Coastal from raising its bid.
"If there's only one short-fused bid on the table, shareholders don't have a choice," Hendrix said in a prepared statement, "they have an ultimatum.
"It may be more than what they had, but we don't believe it is the best they can get."
Coastal's president, James R. Paul, said Coastal plans to respond and make further comment after reviewing documents that Texas Eastern indicated it would file today with the Securities and Exchange Commission.
'White Knight' Seen
In a court hearing last week in Houston, Texas Eastern officials said the company might use a "white knight" to block the Coastal bid and had a list of more than 50 possible buyers.
Coastal officials later suggested that the comment was designed to inflate stock prices and make their offer appear inadequate.
Analysts have said they doubt that there may be a large number of serious contenders to take over Texas Eastern, a natural gas company that is based in Houston.