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"It doesn't seem to me APS is really putting up a very good fight," Hardaway says. "They've belatedly begun to run some ads and issue some statements to correct what they feel are inaccuracies, but the point of it sometimes seems ambiguous."

Hardaway cites a recent APS press release announcing staff cutbacks, issued days after De Michele accused PacifiCorp CEO Gleason of undermining morale at the Palo Verde nuclear plant by saying he would ask SoCal Edison to help run the plant if the merger succeeds. De Michele's memo to APS employees, included with the release, said he didn't know when, or who, or how many would be cut.

"I couldn't figure out if the memo and press release was meant to threaten or to reassure," Hardaway says. "Gleason was quoted saying it was `a helluva way' to let people know their jobs may be in danger, which tended to heighten the irony of De Michele's earlier criticism of him."

And Snell, De Michele's boss, bombed during a June 8 luncheon speech before several hundred members of the Rotary 100 Club at the downtown Sheraton. "He was the typical corporate fat cat," says one Rotarian in the audience. "He came off as condescending and insensitive. He gave us nothing but this boilerplate `we must operate more efficiently' stuff, with a lot of venom towards PacifiCorp. People went away shaking their heads like, `This guy confirms everything PacifiCorp has said.'" Snell says he thought his message "was being received, and favorably so."

Sprinkle, head of the shareholders group, also complains that PinWest is not communicating well. "We're having trouble getting information out of them about why they turned down this [most recent] offer," he says. "We keep asking and they are starting to come out with more, but we've always found it difficult to get information from the board."

Snell says he has met several times with directors of the shareholders association, and says he is not aware they feel they aren't getting the full story.

The public-image problems of APS and its parent PinWest started long before PacifiCorp came to town, notes Anshell of Moses Anshell. "There are some good people there, but we've not seen very much visibility for the positive things they've done in the community," he says. "Most of the publicity concerning them has been over rate issues, or the tremendous negative publicity with Palo Verde. PacifiCorp took the negative perception of APS and further entrenched that."

LESS THAN TWO WEEKS after announcing the impending cuts to the work force, De Michele lobbed another volley. He announced his intention to trim $447.1 million from APS operating costs to reduce the requested rate hike by an as-yet-undetermined amount. The dailies ate it up, the Phoenix Gazette even referred to it as a "rate reduction"--perhaps the first time in history a utility has gotten good press for cutting rates that weren't approved in the first place.

De Michele, however, denies the flurry of announcements about cost-cutting is a PR ploy. "When I became CEO in '88, I announced we would be embarking on a program to reshape the company," he says. "I said it would take five years and we would do it in small bites each year. We have accelerated that process and we've done so as a result of changes in the market, our customer base is not growing as fast as we had projected. In addition, as I've said before, I'm very, very concerned about our rate case. When we filed it, I knew it was high and I've kept pushing our team to find ways to cut it back."

Meanwhile, PacifiCorp officials say they are winding down the Phoenix blitz and laying the groundwork for their next step. "The next phase of the campaign will involve a lot of activity, but most of it won't be happening here," Grosswiler says, refusing to discuss it further.

But the course seems clear. PacifiCorp's next move will be on Wall Street, and in the far-flung headquarters of the institutional investors who hold as much as one million shares each of PinWest stock. The banks, insurance companies and pension funds that make up this group control enough stock--close to 40 percent--to oust the hard-liners in PinWest management and force the survivors to negotiate a merger with PacifiCorp.

Faced with the resplendent belligerence of the PinWest board, PacifiCorp's options are to launch a proxy fight or to make a tender offer directly to stockholders. The first option means winning enough allies among institutional investors to overthrow the current management; the second, to buy the company out from under Snell and the board through the acquisition of common stock.

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Kathleen Stanton