Filed by FirstEnergy Corp. Pursuant to
Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Commission File No.: 333-21011
Subject Company: FirstEnergy Corp.
employee update
Special Edition Aug9 `00 Vol 4.18
GPU to join FirstEnergy
Dear Fellow Employee:
We have started a new chapter for our Company with the announcement
that we have entered into a merger agreement with Morristown, New Jersey-
based GPU, Inc. FirstEnergy, which will acquire all of the common stock
of GPU, will remain headquartered in Akron. Our combination will add GPU
Energy, which serves electric customers in Pennsylvania and New Jersey,
to our family of companies.
This merger, which we hope to complete by mid-2001, will create a
stronger enterprise with greater resources for providing more value to
our customers and shareholders and improved career opportunities for
employees. I will serve as vice chairman and remain chief executive
officer. I also will head a merger integration team that will soon be
formed. Fred D. Hafer, 59, GPU's chairman, president and chief executive
officer, will serve as chairman until he retires at age 62. Here are
other key facts about the merger:
- By joining forces, we'll become the sixth largest investor-owned
electric system in the nation, based on customers served.
- We'll double our electric utility customer base in the region,
serving 4.3 million customers within 37,200 square miles of Ohio,
Pennsylvania and New Jersey - comprising a wider, more diverse service
area that stretches from the Indiana border to the East Coast.
- We'll double the market for our electric generation, natural gas,
telecommunications and mechanical contracting and construction
resources.
- Our combined mechanical contracting and construction business will
be the nation's fourth largest, with approximately $1 billion in
annual revenues and 3,800 employees.
- We anticipate our combination will produce a number of other
benefits, including: cost savings from the combination of operations;
more efficient use of our generation assets; more opportunities to
increase revenues; and lower needs for new capital.
I know you have many questions regarding the merger. Employee
meetings will be held soon. In the meantime, this special edition of
Employee Update should help answer many of your questions. The Company's
internal Web site also will provide information on merger developments.
And, we have a special merger question line. Just dial 825/3773 in the
General Office and record your questions. You do not have to give your
name. We will answer the most-asked questions in future editions of
Employee Update.
Providing customers with high-quality service at competitive prices
will take talented employees who will have more opportunities to assume
greater responsibilities and advance in our enterprise. Through this
merger, we will make a better future for ourselves in the energy
industry. Thank you for your continued support.
Sincerely,
Pete Burg
<PAGE>
Q&A
Q: Which company is acquiring the other?
A: FirstEnergy is acquiring GPU's common stock.
Q: Why was the merger proposed?
A: Our combination will add near-term and long-term value to shareholders
and customers, and improve career opportunities for employees that would
not otherwise be possible. It's a strong strategic fit - helping us
achieve our vision of being the premier energy and related services
provider in our targeted 13-state region of the northeastern quadrant of
the nation; joining our contiguous transmission and distribution
networks; and doubling our customer base, which will provide a natural
market for our electricity, natural gas, facilities services and
telecommunications resources. And, with the earnings growth and cost
reductions we expect from our combination, the merger will help us better
meet the competitive and business challenges our Company faces.
Q: How will employees benefit from the merger?
A: After the merger, the Company will still be named FirstEnergy Corp.
We'll need talented employees to provide customers with high-quality
electric service and other related services at competitive prices and to
enhance the value of our shareholders' investments. Over the long term,
that means improved career opportunities and added responsibilities for
more employees than would have been possible if our companies remained
separate.
Q: How will the merger benefit shareholders?
A: Shareholders will benefit from owning a larger company with more
resources to meet the challenges of a changing electric utility industry.
The merger is expected to be accretive to earnings and cash flow
immediately upon its completion, and should enhance earnings growth
potential. The merger also should improve the long-term value of their
investment because it will better enable the companies to reduce costs,
lower debt, maximize operating efficiencies, and increase sales in their
contiguous service areas.
Q: Will shareholders vote on the merger?
A: Yes. The merger will require, among other things, a positive vote
representing a majority of the shares outstanding for FirstEnergy and a
majority of GPU votes cast for shares of common stock. FirstEnergy has
228.6 million shares of common stock outstanding and GPU has 122.9
million. The companies' articles of incorporation determine the approval
requirements. We expect to begin soliciting proxies before the end of the
year. Employees who own stock through their 401(k) plans also will have
the opportunity to vote on the merger.
Q: How will the merger affect dividends?
A: Until the merger has been completed, it's expected that FirstEnergy
shareholders will continue receiving an annual dividend of $1.50 per
share, and GPU shareholders will continue receiving an annual dividend of
$2.18 per share. After the merger, the Board of Directors will determine
the dividend, but it is expected that initially it will be the same as
FirstEnergy's current annual dividend of $1.50 per share. The companies
understand the importance of providing shareholders with consistent
dividend payments and long-term growth in the value of their investment.
Q: Will Three Mile Island be a liability for FirstEnergy in the future?
A: GPU sold Unit 1 of the Three Mile Island nuclear plant to AmeriGen
Energy Company in December 1999. Decommissioning for Unit 2, which is
owned by GPU, has been fully funded and provided for in advance of the
transaction with FirstEnergy. This unit is permanently shut down and
defueled. It is expected to be decommissioned when its license expires in
2014.
Q: What is the value of the merger?
A: Based on the closing price of FirstEnergy's common stock on August 4,
the combined company would have an equity value of $8.5 billion.
Q: Will the merger produce any savings?
A: The companies expect the merger to produce savings by eliminating
duplicative activities, improved operating efficiencies, improved
generation efficiency and the combination of our work forces. Our review
of such savings has not been finalized.
Q: Who will run FirstEnergy after completion of the transaction?
A: Pete Burg, our chairman and CEO, will remain CEO and become vice
chairman. Fred D. Hafer, 59, GPU's chairman, president and CEO, will
become chairman until his retirement at age 62. Pete also will head up
the merger integration team. No other officers or employees have been
named.
Q: How will the new company be structured?
A: In addition to our subsidiaries, FirstEnergy will own GPU Energy,
which serves electricity customers in Pennsylvania and New Jersey.
FirstEnergy will remain headquartered in Akron, and some corporate
functions may remain in New Jersey. The electric utility operating
companies' principal offices will remain at their current locations.
Q: Will each electric utility operating company keep its own work force?
A: Yes. The electric utility operating companies and their employees will
continue to provide service to customers.
Q: How will this affect labor agreements?
A: All employee contracts, including labor agreements, will be honored.
Q: How many customers and employees do the companies have?
A: FirstEnergy has approximately 2.2 million electric utility customers
and about 9,800 utility employees and a total of 13,300 employees. Having
sold its power plants, GPU has 2.1 million electric customers and
approximately 4,900 utility employees in the U.S., as well as 2.7 million
customers and approximately 4,700 employees, primarily in the United
Kingdom, Argentina and Australia.
Q: What happens to 401(k) plans, incentive compensation plans, pension
plans and other benefits?
A: Current benefits and compensation plans will remain in place. A merger
integration team will review compensation programs to ensure that our
benefits going forward are commensurate with those needed to attract and
keep the best employees in a company as large as FirstEnergy will be.
Q: How will the companies operate during this period?
A: Until the merger is complete, the companies will operate
independently. A merger integration team with representatives from both
companies will be established soon to evaluate how best to organize and
operate following the merger and to identify opportunities that may be
available before the merger is completed.
Q: How will FirstEnergy's Board of Directors be structured?
A: After completing the merger, the Board of Directors of FirstEnergy
will be made up of 10 members from FirstEnergy's Board and 6 members from
GPU's.
Q: What regulatory approvals are needed to complete the transaction?
A: The transaction is conditioned, among other things, upon the approval
of each company's shareholders and various regulatory agencies, including
the Federal Energy Regulatory Commission, the Nuclear Regulatory
Commission, the Federal Communications Commission, and the Securities and
Exchange Commission (SEC), as well as any approvals in Ohio,
Pennsylvania, and New Jersey that may be needed to complete the merger.
FirstEnergy intends to register as a holding company with the SEC under
the Public Utility Holding Company Act of 1935. The companies expect the
merger can be completed within 12 months.
<PAGE>
Other merger highlights
Merger agreement
- FirstEnergy will become a registered utility holding company.
- U.S. electric utility operating units will be Ohio Edison, The
Illuminating Company, Toledo Edison, Penn Power, and GPU Energy.
- Corporate headquarters will remain in Akron, and the operating
companies will retain their names and their principal offices will
remain at their current locations.
- The Board of Directors will include 10 members of FirstEnergy and 6
from GPU.
- FirstEnergy shareholders retain their common stock; GPU shareholders
receive the equivalent of $36.50 for each share they own, payable in
cash or FirstEnergy stock.
Merger benefits
- Larger enterprise with more resources to enhance near-term and long-
term value to shareholders, provide better service at competitive
prices to customers, continue the companies' strong traditions of
financial and volunteer support to communities, and offer better
career opportunities for employees than if the companies remained
separate.
- Contiguous transmission and distribution networks.
- Synergies from joining operations and sharing of employee skills and
the best practices.
- More diverse customer base.
New FirstEnergy statistics
- Nation's sixth largest investor-owned electric system, based on
customers served.
- 14,700 employees serving 4.3 million electric customers within
37,200 square miles of Ohio, Pennsylvania, and New Jersey.
- State and local tax payments of $1.2 billion and 14,700 employees in
the region will make FirstEnergy one of each state's largest taxpayers
and employers.
- $12.0 billion in annual revenues, $38.6 billion in assets, 12,567
megawatts of generating capacity, and 103 transmission
interconnections with 14 electric systems in the region.
Profile: GPU's Fred D. Hafer
Fred D. Hafer is chairman, president and chief executive officer of
GPU, Inc., a registered electric utility holding company headquartered in
Morristown, New Jersey.
In 1996 Mr. Hafer was elected president and Chief Operating Officer
of GPU, Inc., and in 1997 he was elected chairman, president and CEO.
Preceding these appointments, he held the positions of president for Met-
Ed/Penelec and Met-Ed, being named to those offices in 1994 and 1986,
respectively. Under Mr. Hafer's leadership, the companies were combined
as part of GPU's restructuring.
Mr. Hafer joined the GPU system in 1962 as an engineering trainee.
In 1970 he was named treasurer, and in 1977 he was appointed vice
president of rate case management for GPU Service, Inc. In that capacity
he directed all federal and state regulatory activities for Met-Ed,
Penelec and Jersey Central Power & Light.
Mr. Hafer and his wife Martha have three sons.
<PAGE>
GPU corporate profile
GPU develops, owns and operates transmission and distribution
facilities globally, serving more than six million customers around the
world.
GPU's largest subsidiary comprises Jersey Central Power and Light
(JCP&L), Metropolitan Edison Company (Met-Ed) and Pennsylvania Electric
Company (Penelec) currently doing business as GPU Energy. These operating
companies have been supplying electricity to residents in New Jersey and
Pennsylvania for more than a century. Today, GPU Energy annually provides
approximately 44 billion kilowatt-hours of electricity to more than 2
million customers in half the land areas of both states.
Midlands Electricity plc. (MEB) serves 2.2 million customers in
central England in an area covering more than 8,000 square miles. The
company's annual sales exceed 25 billion kilowatt-hours of electricity.
GPU GasNet encompasses 1,105 miles of gas transmission pipeline and
consists of two separate networks, the Principal System and the Western
System. Both Systems supply all of the natural gas consumed in the
Australian state of Victoria, including the state's capital - Melbourne
GPU GasNet's transmission network serves gas utility providers, serving
approximately 1.3 million residential consumers and nearly 40,000
industrial and commercial customers.
GPU Emdersa owns three electric distribution companies - Edesa,
Edelar and Edesal, located in northwest Argentina. The three companies
serve approximately 350,000 customers throughout a service territory of
approximately 124,000 square miles.
GPU International (GPUI) is a global generation company that
acquires, develops and manages electric generation businesses. The GPUI
portfolio includes assets with long-term contracts for the output of its
generation. The company has 22 plants in production or development, with
a capacity of nearly 7,000 megawatts, located in Bolivia, Colombia,
Pakistan, Philippines, Turkey, United Kingdom and the United States. GPUI
also provides operation and maintenance services to new and existing
generation facilities, and it pursues an aggressive strategy of process
improvement to provide cost-effective energy supplies to its customers.
GPU Service provides strategic leadership and corporate governance
for the corporation. Strategic Initiatives, under the umbrella of GPU
Service, identifies, evaluates and initiates new business opportunities
for GPU through the introduction of new business, joint ventures, and
acquisitions in unregulated business sectors. Strategic Initiatives is an
important link to efficiency and growth for GPU. In corporate governance,
the Service group supports the financial, investor relations, accounting,
communications, legal and other corporate services for GPU, Inc. and
system companies.
GPU Advanced Resources, a non-regulated subsidiary of GPU, was
formed to provide energy and related services to retail customers. The
mission of GPU/AR is to work within deregulated environments to produce
significant savings for energy choice customers without compromising
service.
GPU Telcom: GPU Telcom Services is a Telecommunications Infrastructure
Development and Management Company.
GPU Solar was formed in 1997 to pursue the rapidly growing market for
grid-connected solar electric power systems. GPU Solar is focusing on
developing 50-kilowatt to 200-kilowatt power plants.
<PAGE>
[Map of Ohio, Pennsylvania and New Jersey]
<TABLE>
FirstEnergy and GPU: Facts At A Glance
<CAPTION>
Period Ended June 30, 2000 FirstEnergy GPU New FirstEnergy
<S> <C> <C> <C>
U.S. Customers 2.2 million 2.1 million 4.3 million
International Customers 0 2.7 million 2.7 million
Total Customers 2.2 million 4.8 million 7.0 million
U.S. Electric Utility
Employees 9,800 4,900 14,700
U.S. Non-Electric Utility
Employees 3,500 400* 3,900
International Employees 0 4,664 4,664
Total Employees 13,300 10,830 24,130
U.S. Service Area
(Square Miles) 13,200 24,000 37,200
U.S. Generating
Capacity (MW) 12,071 496 (equity) 12,567
International Generating
Capacity 0 1,557 (equity) 1,557
Total Capacity 12,071 2,053 (equity) 14,124
U.S. Peak Load (MW) 12,713 9,816 22,529
U.S. Capacity Factor 66.7% N/A
U.S. Transmission Line
Miles 8,752 6,000 14,752
U.S. Transmission
Interconnections 37 66 103
U.S. Distribution Line
Miles 55,932 62,000 117,932
U.S. Transmission
Substations 122 102 224
U.S. Distribution
Substations 628 942 1,570
Financial Highlights
12 Months Ended
June 30, 2000
Revenues $6.7 billion $5.3 billion $12.0 billion
Net Income $582 million $431 million**
Earnings Per Share $2.58 $3.52**
Current Annual Dividends
Per Share $1.50 $2.18
Common Shares Outstanding 228.6 million 122.9 million
Capital Expenditures $717 million $541 million $1.3 billion
U.S. Kilowatt-hours
Sold 70.8 billion 45.3 billion 116.1 billion
Financial Highlights
At June 30, 2000
Total Assets $18.1 billion $20.5 billion $38.6 billion
Total Common Equity $4.6 billion $3.2 billion
Book Value Per Share $20.67 $26.99
Closing Price (8/4/00) $26.94 $28.06
<FN>
* Approximate figure excludes contract union employees
**Normalized
</FN>
</TABLE>
Merger question line
Employees with questions regarding the merger are encouraged to call our
special merger question line: 825/3773 or (330) 384-3773. You do not have
to give your name. Your question will be recorded, and we will answer the
most-asked questions in future editions of Employee Update.
Employee Update is published for employees of FirstEnergy and its
operating companies and subsidiaries by the Communications Department.
Send story ideas to Ellen Donnachie, editor, through e-mail,
[email protected], or call Ellen at 825/5241, or 330-384-
5241.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995
This publication contains forward-looking statements within the
meaning of the "safe harbor" provisions of the United States Private
Securities Litigation Reform Act of 1995. Investors are cautioned that
such forward-looking statements with respect to revenues, earnings,
performance, strategies, prospects and other aspects of the businesses of
FirstEnergy Corp. and GPU, Inc. are based on current expectations that
are subject to risks and uncertainties. A number of factors could cause
actual results or outcomes to differ materially from those indicated by
such forward-looking statements. These factors include, but are not
limited to, risks and uncertainties relating to: failure to obtain
expected synergies from the merger, delays in obtaining or adverse
conditions contained in any required regulatory approvals, changes in
laws or regulations, economic or weather conditions affecting future
sales and margins, changes in markets for energy services, changing
energy market prices, availability and pricing of fuel and other energy
commodities, legislative and regulatory changes (including revised
environmental and safety requirements), availability and cost of capital
and other similar factors. Readers are referred to FirstEnergy's and
GPU's most recent reports filed with the Securities and Exchange
Commission.
Additional Information and Where to Find It
In connection with the proposed merger, FirstEnergy Corp. and GPU,
Inc. will file a joint proxy statement/prospectus with the SEC. INVESTORS
AND SECURITY HOLDERS ARE ADVISED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. Investors and security holders may obtain a free
copy of the joint proxy statement/prospectus (when available) and other
documents filed by FirstEnergy and GPU with the SEC at the SEC's Web site
at http://www.sec.gov. Free copies of the joint proxy
statement/prospectus, once available, and each company's other filings
with the SEC may also be obtained from the respective companies. Free
copies of FirstEnergy's _filings may be obtained by directing a request
to FirstEnergy Corp., Investor Services, 76 S. Main St., Akron, Ohio
44308-1890, Telephone: 1-800-736-3402. Free copies of GPU filings may be
obtained by directing a request to GPU, Inc., 310 Madison Avenue,
Morristown, New Jersey 07962, Telephone: 1-973-401-8720.
FirstEnergy, its directors, certain executive officers, and certain
other employees (Thomas M. Welsh, manager of Communications, and Kurt E.
Turosky, manager of Investor Relations) may be deemed under the rules of
the SEC to be "participants in the solicitation" of proxies from the
security holders of FirstEnergy in favor of the merger. FirstEnergy's
directors, and executive officers beneficially own, in the aggregate,
less than 1% of the outstanding shares of FirstEnergy common stock.
Security holders of FirstEnergy may obtain additional information
regarding the interests of the "participants in the solicitation" by
reading the joint proxy statement/prospectus relating to the merger when
it becomes available.
GPU, its directors (Theodore H. Black, Fred D. Hafer (Chairman; CEO
and President), Thomas B. Hagen, Robert Pokelwaldt, John M. Pietruski,
Catherine A. Rein, Bryan S. Townsend, Carlisle A.H. Trost, Kenneth L.
Wolfe and Patricia K. Woolf), certain executive officers (Ira H. Jolles
(Senior Vice President and General Counsel), Bruce L. Levy (Senior Vice
President and CFO) and Carole B. Snyder (Executive Vice President
Corporate Affairs)) and certain other employees (Jeff Dennard (Director
of Corporate Communications), Joanne Barbieri (Manager of Investor
Relations) and Ned Raynolds (Manager of Financial Communications)) may be
deemed under rules of the SEC to be "participants in the solicitation" of
proxies from the security holders of GPU in favor of the merger. GPU's
directors, and executive officers beneficially own, in the aggregate,
less than 1% of the outstanding shares of GPU common stock. Security
holders of GPU may obtain additional information regarding the interests
of "participants in the solicitation" by reading the joint proxy
statement/prospectus relating to the merger when it becomes available.
