SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 8-K
CURRENT REPORT
___________________________________
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
DATE OF REPORT (Date of earliest event reported):
June 12, 1998
KEYSPAN ENERGY CORPORATION
(Exact name of registrant as specified in charter)
New York 1-14508 11-3344628
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
One Metro Tech Center, Brooklyn, New York 11201-3850
718-403-1000
(Address and Telephone Number of Principal Executive Offices)
Item 1. CHANGES IN CONTROL OF REGISTRANT.
On May 28, 1998, pursuant to the Agreement and Plan of Merger, dated
as of June 26, 1997, by and among MarketSpan Corporation (formerly known as BL
Holding Corp., "MarketSpan"), Long Island Lighting Company ("LILCO"), Long
Island Power Authority ("LIPA"), and LIPA Acquisition Corp. (the "Merger
Agreement"), LIPA acquired all of the then outstanding common stock of LILCO for
$2.4975 billion in cash and thereafter directly or indirectly assumed, redeemed
or refinanced certain liabilities as well as approximately $339 million in
preferred stock and approximately $3.6 billion in debt attributable to LILCO.
Immediately prior to such acquisition, all of its assets employed in the conduct
of its gas distribution business and its non-nuclear electric generation
business, and all common assets used by LILCO in the operation and management of
its electric transmission and distribution business and its gas distribution
business and/or its non-nuclear electric generation business (the "Transferred
Assets") were sold to MarketSpan and transferred to the following wholly-owned
subsidiaries of MarketSpan (the "Transferee Subsidiaries") at MarketSpan's
direction: MarketSpan Gas Corporation, MarketSpan Trading Services LLC,
MarketSpan Generation LLC, MarketSpan Corporate Services LLC, MarketSpan Utility
Services LLC, and MarketSpan Electric Services LLC, each a New York corporation
or limited liability company, and MarketSpan Finance Corporation, a Vermont
corporation (the "Transfer").
The consideration for the Transferred Assets consisted of (i)
3,440,625 shares of the common stock of MarketSpan, (ii) 553,000 shares of the
Series B preferred stock of MarketSpan, (iii) 197,000 shares of the Series C
preferred stock of MarketSpan, (iv) the assumption by MarketSpan of certain
liabilities of LILCO. The value of the consideration was determined by
MarketSpan and LILCO to be equal to the net fair market value of the Transferred
Assets. The Transfer was effected by a Bill of Sale, dated as of May 28, 1998,
made and executed by LILCO and acknowledged by MarketSpan. At the time of the
Transfer, Dr. William J. Catacosinos was a director and Chief Executive Officer
of both LILCO and MarketSpan, and the following individuals held the respective
offices at both LILCO and MarketSpan: Leonard P. Novello - Senior Vice President
and General Counsel; Joseph E. Fontana - Vice President, Controller and Chief
Accounting Officer; Kathleen A. Marion - Vice President and Secretary. In
addition, at the time of the Transfer, James T. Flynn was a director, President
and Chief Operating Officer of LILCO and Executive Vice President of MarketSpan.
Also, on May 28, 1998, KeySpan Energy Corporation ("KeySpan") was
merged with and into a subsidiary of MarketSpan, pursuant to an Agreement and
Plan of Exchange and Merger, dated as of December 29, 1996, between LILCO and
the Brooklyn Union Gas Company ("Brooklyn Union"). This agreement was amended
and restated as of February 7, 1997, June 26, 1997, and September 29, 1997, to
reflect certain technical changes and the assignment by Brooklyn Union of all of
its rights and obligations under the agreement to KeySpan. On September 29,
1997, KeySpan became the parent company of Brooklyn Union when it reorganized
into a holding company structure. At the time of the merger, Robert B. Catell
was a
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Director, Chairman, President and Chief Executive Officer of KeySpan and a
Director, President and Chief Operating Officer of MarketSpan. Also at the
time of the merger Craig G. Matthews was Executive Vice President of KeySpan
and Executive Vice President and Chief Financial Officer of MarketSpan.
As a result of these transactions, holders of KeySpan common stock
received one share of MarketSpan common stock, par value $.01 per share, for
each share of KeySpan they owned and holders of LILCO common stock received
0.880 shares of MarketSpan common stock for each share of LILCO they owned. Upon
closing of these transactions, holders of KeySpan and LILCO owned 32% and 68%,
respectively, of the MarketSpan common stock. MarketSpan's common stock and
certain series of its preferred stock have been listed on the New York and
Pacific Stock Exchanges under the symbol "MN." KeySpan and LILCO common stock
are no longer traded on a national securities exchange.
MarketSpan and its wholly-owned subsidiaries own and operate the gas
utility system and non-nuclear electric generating plants previously owned by
LILCO and the gas utility system owned by Brooklyn Union. In addition,
MarketSpan continue's to operate the electric transmission and distribution
systems previously owned by LILCO in accordance with a comprehensive set of
operational and management services agreements with LIPA.
The number of directors comprising the Board of Directors of
MarketSpan will be 15 persons, six designated by KeySpan, six designated by
LILCO, and three designated by a committee consisting of prior KeySpan and LILCO
directors. Currently the board consists of 14 persons, as follows:
William J. Catacosinos George Bugliarello
Robert B. Catell Howard R. Curd
Donald H. Elliott Richard N. Daniel
Alan H. Fishman Basil A. Paterson
Stephen W. McKessy Frederic V. Salerno
Edward D. Miller James R. Jones
James Q. Riorden Vincent Tese
In connection with the transactions described above, MarketSpan
issued a press release, a copy of which is attached hereto as Exhibit 99.1 and
is incorporated herein by reference.
Item 5. OTHER EVENTS.
On June 10, 1998, former shareholders of LILCO commenced a lawsuit in New
York State Supreme Court, Nassau County (the "Court") against LILCO and each of
the former directors of LILCO (ROSE LIPSCHUTZ, ET AL. V. WILLIAM J. CATACOSINOS,
ET AL.). Also on this date,
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former shareholders of LILCO and KeySpan commenced a lawsuit in the Court
against MarketSpan, "the former officers and/or directors of LILCO and current
officers and/or directors" of MarketSpan (CLAIRE KUDEL, ET AL. V. WILLIAM J.
CATACOSINOS, ET AL.). The suits generally allege that in connection with
payments LILCO had determined were payable in connection with the LIPA and
KeySpan transactions (i) to Dr. Catacosinos relating to retirement benefits,
incentive compensation and benefits pursuant to agreements entered into between
LILCO and Dr. Catacosinos, which amounts totaled approximately $42 million; and
(ii) to former officers of LILCO relating to retirement benefits, incentive
compensation and benefits pursuant to employment agreements entered into between
LILCO and such officers, which amounts totaled approximately $25 million, $14.5
million of which related to such employment agreements (the "Payments"): (1) the
named defendants breached their fiduciary duty owed to LILCO and KeySpan former
and current MarketSpan shareholders as a result of the Payments; (2) the former
directors and officers of LILCO intended to defraud such shareholders by means
of manipulative, deceptive and wrongful conduct, including materially inaccurate
and incomplete news reports and filings with the Securities and Exchange
Commission; and (3) the former officers derived an improper economic benefit as
a result of their breach of fiduciary duty. Both suits seek to have a plaintiff
class certified which includes certain shareholders of MarketSpan who were
former shareholders of LILCO and/or The Brooklyn Union Gas Company (or KeySpan)
(other than the defendants and other related entities). Also, on June 10, 1998,
MarketSpan received a demand letter from counsel for a former shareholder of
LILCO requesting that MarketSpan take legal action to recover the Payments.
Under the terms of the Merger Agreement, MarketSpan has assumed all
indemnification obligations LILCO may have to its former officers and directors
and has agreed to indemnify LILCO for certain liabilities relating to LILCO's
activities prior to the closing of the transaction with LIPA, including the
activity relating to the Payments. MarketSpan believes the allegations in the
suits are entirely without merit, and is determined to defend the actions
vigorously.
In addition, certain related investigations have been commenced by
the New York State Public Service Commission and the New York State Attorney
General relating to the Payments and disclosures made by LILCO with respect
thereto prior to the closing of the LIPA and KeySpan transactions.
The Company is unable to determine the outcome of each of the
proceedings discussed above and what effect, if any, such outcome will have on
its financial condition and results of operations.
At a meeting held on June 11, 1998, the MarketSpan Board of
Directors determined to thoroughly review the Payments and the issues relating
thereto, and will retain outside legal counsel to assist in this review. The
Board intends to resolve this matter expeditiously.
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Pro Forma Financial Statements as of and for the twelve months ended March 31,
1998 are included in the Form 8-K dated June 12, 1998, filed by MarketSpan
Corporation, KeySpan's parent company. There are hereby incorporated by
reference in this Form 8-K KeySpan Energy Corporation's Annual Report on Form
10-K, for the year ended September 30, 1997 filed on December 31, 1997 and
KeySpan Energy Corporation's Quarterly Reports on Form 10-Q, for the periods
ended March 31, 1998 and December 31, 1997 filed on May 14, 1998 and
February 13, 1998, respectively.
Exhibits
2.1 Agreement and Plan of Exchange and Merger, dated as of December 29, 1996,
as amended between LILCO and KeySpan and the Agreement and Plan of Merger,
dated as of June 26, 1997, by and among MarketSpan Corporation (formerly
known as BL Holding Corp.), LILCO, LIPA, LIPA Acquisition Corp. (filed as
Annex A and Annex D, respectively, to Registration Statement on Form S-4,
No. 333-30353 on June 30, 1997) and hereby incorporated by reference and
made a part of this report with the same effect as if filed herewith.
99.1 Press Release dated May 29, 1998 announcing the consummation of the
transactions between LILCO, KeySpan, LIPA and MarketSpan.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 12, 1998
KEYSPAN ENERGY CORPORATION
(Registrant)
By:/s/ Robert R. Wieczorek
---------------------------
Robert R. Wieczorek
Vice President, Secretary
and Treasurer
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EXHIBIT 99.1
New York Contact: Long Island Contact:
Media: Robert Mahony Media: Elaine Davis
(718) 403-2503 (516) 545-5052
Investors: Jan Childress Investors: William Catacosinos,Jr.
(718) 403-3382 (516) 545-4688
FOR IMMEDIATE RELEASE:
KeySpan and LILCO Combine to Form MarketSpan
"Brooklyn Union" and "LIPA" replace "LILCO" on Long Island
New York, May 29, 1998 -- KeySpan Energy Corporation (NYSE: KSE)
combined today with Long Island Lighting Company (NYSE: LIL) to form
MarketSpan Corporation (NYSE:MN), a new holding company dedicated to
market growth in the Northeast as well as investments in energy in
North America and abroad.
KeySpan and LILCO trading on the New York Stock Exchange will be
replaced by MarketSpan at the opening bell on June 1, 1998.
Shareholders of LILCO will receive 0.880 shares of MarketSpan common
stock for each share of LILCO, and KeySpan shareholders will receive
one share of MarketSpan common stock for each share of KeySpan. Within
two weeks, KeySpan and LILCO shareholders of record on May 29, 1998,
will receive instructions in the mail for exchanging their stock.
"The merger consummated today provides customers from Staten Island to
Montauk Point with reduced energy costs and enhanced services," said
William J. Catacosinos, Chairman and CEO of MarketSpan.
"By merging, we are in the forefront of the transformation of the
energy market in the Northeast," said Robert B. Catell, President and
COO of MarketSpan. "The merger provides us with the base for strategic
growth that will help us compete and succeed in the region."
Headquartered in both Brooklyn and Hicksville, MarketSpan owns LILCO's
common plant, non-nuclear electric-generation assets and operations,
and the regulated natural gas businesses of both LILCO and Brooklyn
Union. In addition, MarketSpan owns KeySpan's unregulated subsidiaries
and its investments in gas exploration, production and transportation
-- including a 66% ownership in Houston Exploration Company
(NYSE:THX). The KeySpan unregulated subsidiaries, which have achieved
high recognition for providing energy supply, management and services,
will retain their names.
As a result of consolidation, Brooklyn Union will continue to serve
customers in Brooklyn, Queens, and Staten Island. A separate
MarketSpan subsidiary will provide gas service to Long Island also
under the Brooklyn Union name.
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In conjunction with the sale of some of LILCO's electric assets today
to the Long Island Power Authority, LIPA became the authority
providing electric service on Long Island. Long Island gas and
electric customers will pay their gas and electric bills to the Long
Island Power Authority. Gas customers on Long Island who do not buy
electricity from LIPA, however, will pay their bills to Brooklyn
Union.
Brooklyn Union customers in New York City and on Long Island, in
general, will begin receiving an average reduction of 3.8% in their gas
transportation rate. In New York City, the reduction results from the
consolidation. On Long Island, the reduction results from both the
consolidation and a 2.1% reduction set by a rate agreement with the New
York State Public Service Commission on February 5, 1998.
MarketSpan will have 8,000 employees and serve more than 1.5 million
natural gas customers. The Company will also operate five electric
generating plants on Long Island and manage the transmission and
distribution of electricity to more than one million electric
customers in Nassau and Suffolk Counties and the Rockaway Peninsula of
Queens County under a contract with the Long Island Power Authority.
For more information about MarketSpan, visit our web site at
www.marketspancorp.com.
This press release includes forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements reflect numerous assumptions and involve a
number of risks and uncertainties. Among the factors that could cause
actual results to differ materially are: electric load and customer
growth; abnormal weather conditions; available sources and cost of
fuel and generating capacity; the speed and degree to which
competition enters the power generation, wholesale and retail sectors
of the electric utility industry; state and federal regulatory
initiatives that increase competition, threaten cost and investment
recovery, and impact rate structures; the ability of the combined
company to successfully reduce its cost structure; the degree to which
the combined company develops non- regulated business ventures; the
economic climate and growth in the service territories of the two
companies; economies generated by the combination; inflationary trends
and interest rates and the other risks detailed from time to time in
reports and other documents filed by LILCO and KeySpan with the
Securities and Exchange Commission.
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