NEW YORK, Oct. 19 /PRNewswire/ -- Harbert Distressed Investment Master Fund, Ltd. today delivered the following letter to the board of directors of NorthWestern Corporation (Nasdaq: NWEC - News ). Harbert sent the letter to communicate its views regarding the proposal by Montana Public Power, Incorporated to buy NorthWestern in an effort to obtain fair value for its investment.
Harbert Distressed Investment Master Fund, Ltd. is focused on high-yield (special situation) and distressed securities on both the long and short sides, including debt and equity investments in turnarounds, restructurings, liquidations, event driven situations and inter-capital arbitrage.
Harbert Distressed Investment Master Fund, Ltd. ("Harbert") holds approximately 20% of the outstanding common stock and approximately 33% of the warrants of NorthWestern Corporation (the "Company") and approximately 20% of the Class 7 prepetition claims against the Company. We are writing this letter to communicate our views as a shareholder of the Company in an effort to obtain fair value for our investment.
We have discussed the views contained in this letter with other shareholders and believe that they share the views of Harbert expressed herein. We believe that these other shareholders, taken together with Harbert, own a majority of the outstanding common stock of the Company.
We first became aware of Montana Public Power, Incorporated's ("MPPI") proposal to buy the Company on June 30, 2005. The Company indicated that the Board rejected the MPPI bid in a press release dated July 7, 2005. Shortly thereafter, we met with you and senior management to understand the basis for the Board's conclusions, and asked you to provide detail on why you believed a stand alone valuation was superior to MPPI's $32.50 per share cash offer. We have not received any response to this request, other than an indication in July 2005 that the Company is developing guidance as to earnings and dividend policy and will make this public under certain conditions. The principal argument we have heard from you and the Company to date is that the MPPI offer will be difficult to consummate. As you know, we retained Milbank Tweed and Lehman Bros. to evaluate the MPPI proposal. We and our advisors have met several times with MPPI and its advisors in an effort to determine if the MPPI offer was attractive and executable. We have concluded that the MPPI offer could be successfully consummated and reflects an attractive valuation for the Company.
We were recently copied on a letter and detailed term sheet sent to you by MPPI which further outlines MPPI's proposal to acquire the Company and which in our view satisfactorily addresses each of NorthWestern's previously stated objections. Given the inability of MPPI to interact with management, the proposal remains subject to customary provisions such as regulatory approval, due diligence and documentation of a purchase contract. Harbert believes it is reasonable to expect MPPI would be able to obtain the necessary regulatory approvals.
(a) Start negotiations with MPPI regarding its proposal; (b) Begin a formal sale process to solicit competing offers which are superior to the MPPI proposal; or (c) Disclose a stand alone value proposition, to include 2006 earnings guidance, prospective dividend policy, the opportunities to increase shareholder value through use of free cash flow and the value of the Company's tax NOLs, that demonstrates why the Company represents superior value to MPPI's proposal.
We request that the Board take prompt and immediate action. In particular, we request that a decision is made, announced and implemented on or prior to the November 10th earnings call.
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