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): September 28, 1995
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
1-1443 Central and South West Corporation 51-0007707
(A Delaware Corporation)
1616 Woodall Rodgers Freeway
Dallas, TX 75202-1234
(214) 777-1000
Item 5. Other Events.
On September 28, 1995, Texas Energy Partners plc, a
public limited company organized in the United Kingdom
(Offeror), which is owned (indirectly through wholly owned
subsidiaries) 50% by Central and South West Corporation
(Registrant) and 50% by Houston Industries Incorporated
(Houston) announced a takeover offer (Original Offer) to
acquire all of the issued and outstanding ordinary shares,
50 pence each (Norweb Shares), including Norweb Shares
represented by American Depositary Shares, each of which is
evidenced by American Depositary Receipts representing three
Norweb Shares (Norweb ADSs), of NORWEB plc, a public limited
company incorporated in the United Kingdom (Norweb).
Under the Original Offer, holders of Norweb shares were
offered 8.50 pounds (approximately $13.52) per Norweb share in
cash and a special dividend of 2.00 pounds (approximately $3.18)
per Norweb share. On September 28, 1995, but subsequent to
the Original Offer, North West Water plc, a British water
utility (North West Water), offered holders of Norweb shares
9.75 pounds (approximately $15.51) per Norweb share in cash and a
special dividend of 1.00 pound (approximately $1.59). On October
3, 1995, in response to North West Water's offer, Texas
Energy Partners plc increased its cash offer to holders of
Norweb shares (Increased Offer) to 8.85 pounds (approximately
$14.08) per Norweb Share in cash and a special dividend of
2.00 pounds (approximately $3.18) per Norweb Share.
Norweb is one of the twelve regional electric companies
covering England and Wales. It distributes and supplies
electricity to approximately 2.2 million customers in the
North West of England. Norweb is a foreign private issuer
which is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (Exchange Act),
and in accordance therewith files reports and other
information with the Securities and Exchange Commission.
For additional information concerning Norweb, see Norweb's
Amendment No. 3 to its Registration Statement Pursuant to
Section 12(g) of the Exchange Act filed October 3, 1994 and
its other filings under the Exchange Act.
The Increased Offer is expected to be made by a single
tender offer in the United States, the United Kingdom and
certain other jurisdictions. Holders of Norweb Shares are
being offered 10.85 pounds (approximately $17.26) per Norweb
Share, comprising 8.85 pounds (approximately $14.08) per Norweb
Share in cash and a special dividend of 2.00 pounds (approximately
$3.18) per Norweb Share. Holders of Norweb ADSs who accept
the Increased Offer would receive an aggregate of 32.55 pounds
(approximately $51.78) per Norweb ADS inclusive of the
special dividend. In lieu of all or part of the cash
consideration, each holder of Norweb Shares (other than
holders in the United States and certain other jurisdictions
where compliance with regulatory formalities would be
required) will have the option to receive loan notes of the
Offeror. Such loan notes are intended to provide certain
tax benefits under applicable English tax law to holders in
the United Kingdom. A total of approximately 1.74 billion
pounds (or approximately $2.77 billion), inclusive of the special
dividend, would be required to be paid to purchase all
outstanding Norweb Shares and Norweb ADSs for cash pursuant
to the Increased Offer. The Offeror intends to obtain the
amounts necessary to complete the Increased Offer from the
proceeds of borrowings under credit lines arranged by the
Offeror for that purpose and capital contributions or loans
to be made to the Offeror by the Registrant and Houston
(Parent Contributions). The Registrant, as the indirect
owner of 50% of the Offeror, has committed to contribute to
the capital or loan to Offeror one half of the total amount
of the Parent Contributions and intends to meet such
commitment through internally generated funds and through
2
the proceeds of borrowings under a credit line which has
been arranged by the Registrant for that purpose.
The pound sterling amounts set forth herein have been
converted into U.S. dollar amounts for illustrative purposes
only at an exchange rate of 1.00 pound = $1.5909, the prevailing
rate at 12:00 noon New York City time on October 2, 1995,
the day prior to the announcement of the Increased Offer.
The provisions of the Increased Offer and the Original Offer
are described in the press releases dated October 3, 1995 and
September 28, 1995, respectively, which are attached hereto
as Exhibits 99.1 and 99.2, respectively, and are hereby
incorporated by reference herein in their entirety.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Joint Press Release of Central and
South West Corporation and Houston Industries
Incorporated dated October 3, 1995, Increased
Cash Offer for Norweb.
99.2 Joint Press Release of Central and South
West Corporation and Houston Industries
Incorporated dated September 28, 1995.
3
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 hereunto duly
authorized.
CENTRAL AND SOUTH WEST CORPORATION
Date: October 4, 1995
By: Wendy G. Hargus
Wendy G. Hargus
Controller
4
EXHIBIT 99.1
Embargoed until 4pm 3 October, 1995
HOUSTON INDUSTRIES INCORPORATED
CENTRAL AND SOUTH WEST CORPORATION
INCREASED CASH OFFER FOR NORWEB
Summary of Increased Offer
Houston Industries Energy, Inc. (a subsidiary of Houston
Industries Incorporated ("Houston")) and CSW International,
Inc. (a subsidiary of Central and South West Corporation
("CSW")) announce the terms of an increased cash offer (the
"Increased Offer") for the whole of the issued share capital
of NORWEB plc ("NORWEB"). The Increased Offer will be made
by J.P. Morgan and CS First Boston on behalf of Texas Energy
Partners plc, a company jointly owned by Houston and CSW.
Cazenove & Co. are brokers to the Increased Offer.
The Increased Offer:
* Values each NORWEB Share at 1085p, comprising 885p in
cash and a Special Dividend of 200p (net), and
represents an increase of 35p per NORWEB Share over the
original offer announced on 28 September, 1995 on behalf of
Texas Energy Partners (the "Original Offer");
* Allows certain shareholders to reclaim the tax credit
relating to the Special Dividend of 200p (net) per NORWEB
Share, implying a total gross value for such shareholders of
1135p per NORWEB Share;
* Values the share capital of NORWEB on a fully diluted
basis at approximately 1.74 billion pounds (inclusive of the
net amount of the Special Dividend); and
* Represents a premium of approximately 57 per cent.
over the closing middle market price of a NORWEB Share on 21
June, 1995, the day on which NORWEB published its
preliminary results for the year ended 31 March, 1995.
1
Houston and CSW believe that the Increased Offer (including
the Special Dividend) represents full and fair value for
NORWEB shareholders:
* It exceeds the North West Water full cash alternative
(including the special dividend) announced on 28 September,
1995 by 10p per NORWEB Share exclusive of the tax credits
relating to the special dividends under the two offers, and
by 35p per NORWEB Share including the tax credits;
* It represents a premium of 110p per NORWEB Share
exclusive of the tax credit relating to the Special Dividend
over North West Water's original full cash alternative
announced on 8 September, 1995, and a premium of 160p
including the tax credit;
* It is significantly higher than any cash offer per
share made for any other REC since July 1995; and
* It gives NORWEB shareholders certain value and complete
liquidity.
Houston and CSW believe that NORWEB shareholders should take
into consideration the following in valuing the share
element of North West Water's revised offer:
* The statement made by NORWEB's Board in the
announcement relating to the Original Offer regarding the
factors which may adversely affect the value of the share
element of North West Water's offer;
* The financial risk for current and future North West
Water shareholders of a 1.7 billion pound diversification
into the electricity industry, a business of which North
West Water has no direct experience. This is against the
background of North West Water's current and future cash
commitments including the 2.3 billion pounds of capital
expenditures expected over the next 5 years;
* The potential for changes in taxation for both water
and electricity utilities;
* The possible adverse changes to the regulatory
environment for both water and electricity utilities;
* The doubts which have been expressed about the size,
speed and cost of any synergy benefits which North West
Water believes may flow from an acquisition of NORWEB; and
* The ability of North West Water to retain any such
synergy benefits exclusively for its shareholders during the
period envisaged by North West Water.
NORWEB shareholders who are customers may also wish to
reflect on the potentially difficult transition period
following any takeover of NORWEB by North West Water, and
the concerns expressed about potential monopoly powers over
customers in the North West of England.
2
Commenting on the Increased Offer, Lee Hogan, President and
Chief Operating Officer of Houston Industries Energy, Inc.,
said:
"Our Increased Offer is higher than North West Water's
revised cash offer, and for those shareholders able to
reclaim tax credits on special dividends it is also
higher than the current value of North West Water's
headline cash and share offer. For the second time in
five days we have provided the shareholders in NORWEB
with an offer that is demonstrably superior to North
West Water's full cash alternative. We continue to
believe that our combined strengths will enhance the
development of NORWEB's domestic and international
activities and that our offer is therefore in the best
interests of the business, its customers and employees.
Our Increased Offer makes sense for everyone".
Tom Shockley, President and Chief Executive Officer of CSW
Enterprises, said:
"Texas Energy Partners' Increased Offer is in cash and
provides shareholders with a generous and certain
return on their investment. In contrast, North West
Water's cash and share offer contains a significant
share element that may be adversely affected by a
number of factors including a shortfall in the scale,
timing and delivery of synergy benefits and the
financial risks of diversifying into an activity of
which North West Water has no direct experience. We
believe that our Increased Offer complements the
corporate strategies and shared expertise of Houston,
CSW and NORWEB and that it will deliver significant
benefits to the business."
This summary should be read in conjunction with the attached
announcement, and the announcement dated 28 September, 1995
relating to the Original Offer.
Press enquiries:
HI Energy Lee Hogan 0171 404 5959
CSW Enterprises Tom Shockley 0171 404 5959
J.P. Morgan Roderick Peacock 0171 600 2300
Roger Wood
CS First Boston Stephen Hester 0171 516 1858
Colin Taylor
Brunswick Lucas van Praag 0171 404 5959
John Sunnucks
J.P. Morgan, which is regulated by The Securities and
Futures Authority, is acting for Houston and jointly acting
for Texas Energy Partners plc and no one else in connection
with the Increased Offer and will not be responsible to
anyone other than Houston or Texas Energy Partners plc for
providing the protections afforded to customers of J.P.
Morgan or for giving advice in relation to the Increased
Offer.
CS First Boston Limited, which is regulated by The
Securities and Futures Authority, is acting for CSW and
jointly acting for Texas Energy Partners plc and no one else
in connection with the Increased Offer and will not be
responsible to anyone other than CSW or Texas Energy
Partners plc for providing the protections afforded to
customers of CS First Boston Limited or for giving advice in
relation to the Increased Offer.
3
Embargoed until 4pm 3 October, 1995
HOUSTON INDUSTRIES INCORPORATED
CENTRAL AND SOUTH WEST CORPORATION
INCREASED CASH OFFER FOR NORWEB
Introduction
Houston Industries Energy, Inc. (a subsidiary of Houston
Industries Incorporated ("Houston")) and CSW International,
Inc. (a subsidiary of Central and South West Corporation
("CSW")) announce the terms of an increased cash offer (the
"Increased Offer") to acquire the whole of the issued share
capital of NORWEB plc ("NORWEB"). The Increased Offer will
be made by J.P. Morgan and CS First Boston on behalf of
Texas Energy Partners plc (the "Offeror"), a company jointly
owned by Houston and CSW.
Houston and CSW will procure that NORWEB will pay its
shareholders a Special Dividend of 200p (net) as soon as
practicable after the Increased Offer becomes wholly
unconditional. The Increased Offer plus the net amount of
the Special Dividend values the whole of the share capital
of NORWEB at approximately 1.74 billion pounds, assuming
the exercise in full of all outstanding options, and each
NORWEB Share at 1085p. In addition, certain NORWEB
shareholders will be entitled to reclaim the tax credit
relating to the Special Dividend, implying a gross value per
NORWEB Share of 1135p.
Cazenove & Co. are brokers to the Increased Offer.
The Increased Offer
The Increased Offer will be made on the following basis:
* For each NORWEB Share 885p in cash which, taken
together with the Special
Dividend of 200p (net),
values each NORWEB Share
at 1085p
Save as set out herein, the Increased Offer will be subject
to the conditions and on the terms set out in Appendix 1 of
the announcement of the Original Offer and to be set out in
the formal offer document.
The NORWEB Shares will be acquired by the Offeror fully paid
and free from all liens, equities, charges, encumbrances and
other interests and together with all rights now or
hereafter attaching thereto, including without limitation
the right to retain and receive all dividends and other
distributions declared, made or paid after 27 September,
1995 (the day prior to the date of announcement of the
Original Offer) except for the Special Dividend.
4
On the bases set out in Appendix 2:
* The Increased Offer plus the net amount of the Special
Dividend values the share capital of NORWEB at approximately
1.74 billion pounds (assuming the exercise in full of all
outstanding options);
* The Increased Offer, together with the Special
Dividend, represents:
* A premium of approximately 57 per cent. over the
closing price of a NORWEB Share on 21 June, 1995, the day on
which NORWEB published its preliminary results for the year
ended 31 March, 1995; and
* A premium of 10p over North West Water's full cash
alternative of 1075p (including a special dividend of 100p
(net)) per NORWEB Share announced on 28 September, 1995,
exclusive of the tax credits relating to the special
dividends, and a premium of 35p including the tax credits.
Further details of the financial effects of acceptance of
the Increased Offer are set out in Appendix 1.
If the flotation of the National Grid is effected and NORWEB
distributes shares in National Grid to NORWEB shareholders
by reference to a date prior to the Special Dividend being
paid, the amount per NORWEB Share under the Increased Offer
will be adjusted in the manner described under the paragraph
headed "National Grid" below.
Loan Note Alternative
Instead of some or all of the cash consideration which would
otherwise be receivable by them under the Increased Offer
(but not in respect of the Special Dividend), NORWEB
shareholders (other than certain overseas shareholders) who
validly accept the Increased Offer will be entitled to elect
to receive loan notes to be issued by the Offeror as
described in the announcement relating to the Original
Offer.
NORWEB American Depositary Shares and US dollar election
It is intended that arrangements will be made to enable
holders of NORWEB ADSs to accept the Increased Offer in
respect of their holdings of NORWEB ADSs. In addition,
NORWEB shareholders and holders of NORWEB ADSs validly
accepting the Increased Offer will be able to elect to
receive US dollars instead of pounds sterling in respect of
the cash consideration due under the Increased Offer (but
not in respect of the Special Dividend). Holders of NORWEB
ADSs who are US persons will not be entitled to receive the
Loan Note Alternative.
The Increased Offer values each NORWEB ADS at 32.55
pounds inclusive of the Special Dividend. For illustrative
purposes only, assuming an exchange rate of 1 pound = $1.5909
(the prevailing rate at 12 noon New York City time on 2
October, 1995, the day prior to announcement of the
Increased Offer), the Increased Offer values each NORWEB ADS
at approximately $51.75 inclusive of the Special Dividend.
The Special Dividend
Houston and CSW will procure that as soon as practicable
after the Increased Offer becomes wholly unconditional,
NORWEB will pay a Special Dividend of 200p (net) per NORWEB
5
Share to NORWEB shareholders on the register at the close of
business on a date which will be specified in the offer
document and which will be after the date on which the offer
document is despatched.
If the flotation of the National Grid is effected and NORWEB
distributes shares in National Grid to NORWEB shareholders
by reference to a date prior to the Special Dividend being
paid, the amount per NORWEB Share under the Increased Offer
will be adjusted in the manner described under the paragraph
headed "National Grid" below.
Reasons for accepting the Increased Offer
Houston and CSW believe that the Increased Offer (including
the Special Dividend) represents full and fair value for
NORWEB shareholders:
* It exceeds the North West Water full cash alternative
(including the special dividend) announced on 28 September,
1995 by 10p per NORWEB Share exclusive of the tax credits
relating to the special dividends under the two offers, and
by 35p per NORWEB Share including the tax credits;
* It represents a premium of 110p per NORWEB Share
exclusive of the tax credit relating to the Special Dividend
over North West Water's original full cash alternative
announced on 8 September, 1995, and a premium of 160p
including the tax credit;
* It is significantly higher than any cash offer per
share made for any other REC since July 1995; and
* It gives NORWEB shareholders certain value and complete
liquidity.
Houston and CSW believe that NORWEB shareholders should take
into consideration the following in valuing the share
element of North West Water's revised offer:
* The statement made by NORWEB's Board in the
announcement relating to the Original Offer regarding the
factors which may adversely affect the value of the share
element of North West Water's offer;
* The financial risk for current and future North West
Water shareholders of a 1.7 billion pound diversification
into the electricity industry, a business of which North
West Water has no direct experience. This is against the
background of North West Water's current and future cash
commitments including the 2.3 billion pounds of capital
expenditures expected over the next 5 years;
* The potential for changes in taxation for both water
and electricity utilities;
* The possible adverse changes to the regulatory
environment for both water and electricity utilities;
* The doubts which have been expressed about the size,
speed and cost of any synergy benefits which North West
Water believes may flow from an acquisition of NORWEB; and
* The ability of North West Water to retain any such
synergy benefits exclusively for its shareholders during the
period envisaged by North West Water.
NORWEB shareholders who are customers may also wish to
reflect on the potentially difficult transition period
following any takeover of NORWEB by North West Water, and
the concerns expressed about potential monopoly powers over
customers in the North West of England.
6
NORWEB Share Option Schemes
The Increased Offer will extend to any shares in NORWEB
allotted or issued prior to the date on which the Increased
Offer closes (or such earlier date, not being earlier than
the date on which the Increased Offer becomes unconditional
as to acceptances or, if later, the first closing date of
the Increased Offer, as the Offeror may determine) as a
result of the exercise of options granted under the NORWEB
Share Option Schemes. Appropriate proposals will be made to
optionholders under the NORWEB Share Option Schemes in due
course. It is intended to provide an element of
compensation for the optionholders under the NORWEB
Sharesave Scheme who are due to complete their savings plans
in 1996, to the extent that they do not do so.
National Grid
If the flotation of the National Grid is effected and NORWEB
distributes shares in National Grid to NORWEB shareholders
by reference to a date prior to the Special Dividend being
paid, the Panel has agreed in principle that the Special
Dividend and the Increased Offer will be adjusted to take
account of the value NORWEB shareholders receive in the
distribution calculated by reference to the value of
National Grid. The Special Dividend will be reduced by up
to 100p (net) per NORWEB Share and the cash consideration
per NORWEB Share under the Increased Offer will be reduced
by up to 71p. In that event NORWEB shareholders will be
entitled to retain the shares in National Grid distributed
to them.
Disclosure of interests in NORWEB
Neither Houston nor CSW, nor any of the directors of Houston
or CSW, nor, so far as Houston and CSW are aware, any party
acting in concert with Houston or CSW, owns or controls any
NORWEB Shares or holds any options to purchase NORWEB
Shares. Enquiries are being made as to whether any party
acting in concert with Houston or CSW owns or controls any
NORWEB Shares or holds any options to purchase NORWEB
Shares. If any such interests are revealed, they will be
discussed with the Panel and, if appropriate, will be
disclosed to NORWEB shareholders.
Houston and CSW entered into an agreement regulating the
conduct of the Original Offer (and any revisions,
variations, extensions or renewals thereof). This agreement
requires Houston, CSW and certain of their associates not to
acquire NORWEB Shares without the prior approval of Houston
and CSW, except NORWEB Shares acquired by the Offeror
pursuant to the Increased Offer.
General
Information regarding regulation, employees, the Offeror,
Houston and CSW is contained in the announcement relating to
the Original Offer.
Offer documentation
J.P. Morgan and CS First Boston, on behalf of the Offeror,
will despatch the formal offer documents in due course.
7
Appendix 1
Financial Effects of Acceptance
The following tables show, for illustrative purposes only
and on the bases and assumptions set out in Appendix 2, the
financial effects of acceptance of the Increased Offer on
value and income for an accepting holder of 10 NORWEB
Shares, if the Increased Offer becomes unconditional in all
respects.
Increase in capital value
Cash consideration 88.50 pounds
Special Dividend (net) 20.00 pounds
Total 108.50 pounds
Market value of 10 NORWEB Shares on
21 June, 1995 69.30 pounds
Increase in capital value 39.20 pounds
Representing an increase of 56.6%
Increase in gross income
Gross income from re-investment of cash
consideration 6.81 pounds
Gross income from re-investment of
Special Dividend 1.54 pounds
Total 8.35 pounds
Gross dividend income on 10 NORWEB
Shares 3.55 pounds
Increase in income 4.80 pounds
Representing an increase of 135.3%
8
Appendix 2
Bases and Sources
(i) The middle market price of a NORWEB Share on 21 June,
1995 is derived from the Daily Official List of the
London Stock Exchange;
(ii) The value of the full cash alternative and the special
dividend offered by North West Water for NORWEB is
taken from the announcement of the revised offer
published on 28 September, 1995;
(iii) The value of the whole of the fully diluted share
capital of NORWEB is based upon 156,071,675 NORWEB
Shares in issue on 8 September, 1995 and the 4,163,454
NORWEB ordinary shares which are the subject of options
granted under the NORWEB Share Option Schemes;
(iv) The pound/US dollar exchange rate prevailing at 12 noon
New York City time on 2 October, 1995 is derived from
Reuters page 1FEE;
(v) The cash consideration and the Special Dividend are
each assumed to be re-invested so as to yield 7.70 per
cent. gross per annum, being the yield on the FT
Actuaries Medium Coupon Fixed Interest Index for
securities up to five years maturity on 29 September,
1995;
(vi) The income from NORWEB Shares is based on the total
annual dividend of 28.4p (net) per NORWEB Share paid in
respect of the year ended 31 March, 1995, together with
the associated tax credit of 20/80ths of that dividend;
(vii) Except where expressly stated, no account has been
taken of the tax credit relating to the Special
Dividend which may be reclaimed by certain
shareholders;
(viii) No account has been taken of any liability to
taxation or the treatment of fractions; and
(ix) Numbers in Appendix 1 may not, owing to rounding, add
up to the totals detailed therein.
9
Appendix 3
Definitions
The definitions used in the announcement relating to the
Original Offer also apply in this announcement, together
with the following additional definitions, unless the
context requires otherwise:
"Increased Offer" the offer referred to in this document
to be made by J.P. Morgan and CS First
Boston on behalf of the Offeror to
acquire the NORWEB Shares not already
owned by the Offeror and, where the
context admits, any subsequent revision,
variation, extension or renewal thereof
"Original Offer" the offer referred to in the
announcement dated 28 September, 1995,
which was to have been made by J.P.
Morgan and CS First Boston on behalf of
the Offeror to acquire the NORWEB shares
not already owned by the Offeror
10
EXHIBIT 99.2
Immediate 28 September, 1995
HOUSTON INDUSTRIES INCORPORATED
CENTRAL AND SOUTH WEST CORPORATION
RECOMMENDED CASH OFFER FOR NORWEB
Summary of Offer
The boards of Houston Industries Energy, Inc. (a subsidiary
of Houston Industries Incorporated ("Houston")), CSW
International, Inc. (a subsidiary of Central and South West
Corporation ("CSW")), and NORWEB plc ("NORWEB") announce
that they have agreed a recommended cash offer (the "Offer")
for the whole of the issued share capital of NORWEB. The
Offer will be made by J.P. Morgan and CS First Boston on
behalf of Texas Energy Partners plc, a company jointly owned
by Houston and CSW. Cazenove & Co. are brokers to the
Offer.
The Offer:
* Values each NORWEB Share at 1050p, comprising 850p in
cash and a Special Dividend of 200p (net);
* Allows certain shareholders to reclaim the tax credit
relating to the Special Dividend of 200p (net) per NORWEB
Share, implying a total gross value for such shareholders of
1100p per NORWEB Share;
* Values the share capital of NORWEB at approximately
1.7 billion pounds (inclusive of the Special Dividend);
* Values NORWEB at 11.0 times earnings for the year ended
31 March, 1995 exclusive of the tax credit relating to the
Special Dividend and at 11.5 times earnings including the
tax credit;
* Represents a premium of 51.5 per cent. over the closing
middle market price of a NORWEB Share on 21 June, 1995, the
day on which NORWEB published its preliminary results for
the year ended 31 March, 1995; and
* Represents a premium of 75p over North West Water's
full cash alternative of 975p per NORWEB Share announced on
8 September, 1995, exclusive of the tax credit relating to
the Special Dividend, and a premium of 125p including the
tax credit.
The Board of NORWEB has recommended the Offer after
consideration of all the relevant issues, including the
following:
1
* The Offer, together with the Special Dividend,
significantly exceeds the value of the full cash alternative
offered by North West Water;
* From its contacts with Houston and CSW, the Board has
derived great comfort that the prospects for the business of
NORWEB under their ownership will be enhanced. Houston and
CSW have stated that they will support and reinforce
NORWEB's position as a flagship utility, managed from the
North West, with a focus on customer service and value;
* Houston and CSW will be able to assist NORWEB in the
development of related businesses, such as international
power generation and gas supply, and in the encouragement of
investment in the North West;
* The value of the share element of North West Water's
offer may be adversely affected by:
* Any shortfall in the scale or timing of the delivery of
synergy benefits claimed by North West Water, or the
magnitude of the costs involved in achieving them;
* Any inability by North West Water to retain such
synergy benefits solely for the benefit of North West
Water's shareholders during the period envisaged by it;
* Changes to the regulatory environment for electricity
and water utilities; and
* The perception of the financial risks associated with a
1.6 billion pounds diversification into an activity in which North
West Water has no direct experience, against the background
of its own current and future cash commitments.
Houston Industries Energy, Inc. is responsible for Houston's
electricity industry investments outside the territory
served by Houston Lighting & Power Company, a subsidiary of
Houston which generates, transmits and distributes
electricity for 1.5 million customers on the Gulf Coast of
Texas and which is the ninth largest electric utility in the
US. Houston and its predecessor companies have been in the
electric utility business since 1882. Houston has a market
equity capitalisation of approximately $5.5 billion.
CSW International, Inc., which was formed to own, operate
and manage electricity industry investments outside the
United States, is one of the four subsidiaries within the
CSW Enterprises business unit of CSW. CSW, headquartered in
Dallas, is a public utility holding company which owns four
electric utility operating subsidiaries providing
electricity services to approximately 1.7 million customers
in a widely diversified area covering 152,000 square miles
in the states of Texas, Oklahoma, Louisiana and Arkansas.
This area is the second-largest served by any electric
utility system in the United States. CSW has a market
equity capitalisation of approximately $4.9 billion.
Houston and CSW are co-participants in a large generating
plant in the United States and have co-operated in other
ventures. Both companies believe that their combined
financial strength and similar management philosophies will
create an ideal platform for the development of NORWEB's
domestic and international activities.
Commenting on the Offer, Lee Hogan, President and Chief
Operating Officer of Houston Industries Energy, Inc. said:
"We believe that the UK is an attractive country for
Houston and CSW to expand into and that NORWEB
represents a good investment opportunity. The UK
economy is performing well, the Government has done much
to encourage inward investment, and we are confident
that it is an appropriate location for us to make a
commitment of this magnitude. We intend to make full
2
use of our combined experience in the US to assist in
attracting further new investment into NORWEB's service
territory."
"We are delighted that the Board of NORWEB has agreed to
recommend our Offer, and we will be urging all
shareholders to accept without delay."
Tom Shockley, President and Chief Executive Officer of CSW
Enterprises, said:
"We are convinced that Houston's and CSW's proven
experience in managing electric utilities in the private
sector for more than 100 years means that we can bring
the benefits of our experience to NORWEB's customers.
In addition, the Offer complements the corporate
strategies of all the companies involved. We are proud
of the working relationship that we have with our
employees and the contribution that we make to the
communities which we serve. We believe that our
experience in these areas will be of benefit to NORWEB's
business and customers."
Ken Harvey, Chairman and Chief Executive of NORWEB, said:
"We welcome the benefits for both shareholders and
customers which will arise from the proposed
acquisition. We believe that Houston and CSW represent
ideal partners for NORWEB. The cash Offer significantly
exceeds the full cash alternative put forward by North
West Water. The Board of NORWEB considers that the
terms of this Offer are fair and reasonable and in the
best interests of NORWEB shareholders, and have been so
advised by NatWest Markets. Accordingly, the directors
will unanimously recommend all NORWEB shareholders to
accept this Offer and to reject the unsolicited offer
from North West Water, as they intend to do in respect
of their own NORWEB Shares."
This summary should be read in conjunction with the attached
announcement.
There will be a presentation to analysts at the City
Presentation Centre, 4 Chiswell Street, London EC1 at
10.30 a.m. on 28 September, 1995.
3
Press enquiries:
HI Energy Lee Hogan 0171 404 5959
001 713 220 5595
CSW Enterprises Tom Shockley 0171 404 5959
001 214 777 1000
J.P. Morgan Roderick Peacock 0171 600 2300
Roger Wood
CS First Boston Stephen Hester 0171 516 1858
Colin Taylor
Brunswick Lucas van Praag 0171 404 5959
John Sunnucks
NORWEB Ken Harvey 0171 375 6151 (today)
0161 873 8000 (thereafter)
NatWest Markets David Barclay 0171 375 6151
J.P. Morgan, which is regulated by The Securities and
Futures Authority, is acting for Houston and jointly acting
for Texas Energy Partners plc and no one else in connection
with the Offer and will not be responsible to anyone other
than Houston or Texas Energy Partners plc for providing the
protections afforded to customers of J.P. Morgan or for
giving advice in relation to the Offer.
CS First Boston Limited, which is regulated by The
Securities and Futures Authority, is acting for CSW and
jointly acting for Texas Energy Partners plc and no one else
in connection with the Offer and will not be responsible to
anyone other than CSW or Texas Energy Partners plc for
providing the protections afforded to customers of CS First
Boston Limited or for giving advice in relation to the
Offer.
NatWest Markets, which is regulated by The Securities and
Futures Authority, is acting for NORWEB and no one else in
connection with the Offer and will not be responsible to
anyone other than NORWEB for providing the protections
afforded to customers of NatWest Markets or for giving
advice in relation to the Offer.
4
Immediate 28 September, 1995
HOUSTON INDUSTRIES INCORPORATED
CENTRAL AND SOUTH WEST CORPORATION
RECOMMENDED CASH OFFER FOR NORWEB
Introduction
The Boards of Houston Industries Energy, Inc. (a subsidiary
of Houston Industries Incorporated ("Houston")), CSW
International, Inc. (a subsidiary of Central and South West
Corporation ("CSW")), and NORWEB plc ("NORWEB") announce
that agreement has been reached on the terms of a
recommended cash offer (the "Offer") to acquire the whole of
the issued share capital of NORWEB. The Offer will be made
by J.P. Morgan and CS First Boston on behalf of Texas Energy
Partners plc (the "Offeror"), a company jointly owned by
Houston and CSW.
Houston, CSW and NORWEB have also agreed that NORWEB will
pay its shareholders a Special Dividend as soon as
practicable after the Offer becomes wholly unconditional.
The Offer plus the net amount of the Special Dividend values
the whole of the share capital of NORWEB at approximately
1.7 billion pounds, assuming the exercise in full of all
outstanding options, and each NORWEB Share at 1050p. In
addition, certain NORWEB shareholders will be entitled to
reclaim the tax credit relating to the Special Dividend,
implying a gross value per NORWEB Share of 1100p.
The Board of NORWEB, which has been so advised by NatWest
Markets, considers the terms of the Offer to be fair and
reasonable and in the best interests of NORWEB shareholders.
Accordingly, the directors of NORWEB will unanimously
recommend all NORWEB shareholders to accept the Offer, as
they intend to do in respect of their own NORWEB Shares.
Cazenove & Co. are brokers to the Offer.
The Offer
The Offer will be made on the following basis:
* For each NORWEB Share 850p in cash which,
taken together with the
Special Dividend of 200p
(net), values each
NORWEB Share at 1050p
The Offer will be subject to the conditions and on the terms
set out in Appendix 1 and to be set out in the formal offer
document.
5
The NORWEB Shares will be acquired by the Offeror fully paid
and free from all liens, equities, charges, encumbrances and
other interests and together with all rights now or
hereafter attaching thereto, including without limitation
the right to retain and receive all dividends and other
distributions declared, made or paid hereafter except for
the Special Dividend.
On the bases set out in Appendix 3:
* The Offer plus the net amount of the Special Dividend
values the share capital of NORWEB at approximately 1.7
billion pounds (assuming the exercise in full of all
outstanding options);
* The Offer, together with the Special Dividend,
represents:
* A premium of 51.5 per cent. over the closing price of a
NORWEB Share on 21 June, 1995, the day on which NORWEB
published its preliminary results for the year ended 31
March, 1995; and
* A premium of 75p over North West Water's full cash
alternative of 975p per NORWEB Share announced on 8
September, 1995, exclusive of the tax credit relating to the
Special Dividend, and a premium of 125p including the tax
credit.
Further details of the financial effects of acceptance of
the Offer are set out in Appendix 2.
If the flotation of the National Grid is effected and NORWEB
distributes shares in National Grid to NORWEB shareholders
by reference to a date prior to the Special Dividend being
paid, the amount per NORWEB Share under the Offer will be
adjusted in the manner described under the paragraph headed
"Information on National Grid" below.
Loan Note Alternative
Instead of some or all of the cash consideration which would
otherwise be receivable by them under the Offer (but not in
respect of the Special Dividend), NORWEB shareholders (other
than certain overseas shareholders) who validly accept the
Offer will be entitled to elect to receive loan notes to be
issued by the Offeror on the following basis:
* For every 1 pound of cash under the Offer 1 pound nominal
of Loan Notes
The Loan Notes will be issued credited as fully paid in
amounts and integral multiples of 1 pound nominal value and
any fractional entitlements will be disregarded and not paid.
The Loan Notes will bear interest, payable twice yearly at
the rate per annum calculated to be LIBOR less one per cent.
Interest on the Loan Notes will be payable on 25 March and 2
October in each year (or, if not a business day in any year,
on the following business day). Holders of the Loan Notes
will have the right to redeem Loan Notes on 2 October, 1996
and on interest payment dates thereafter. Unless previously
redeemed or purchased, the Loan Notes will be redeemed on 2
October, 2000. The Loan Notes will be unsecured and will
not be guaranteed.
The Loan Notes will, subject to certain conditions, be
transferable, but no application is intended to be made for
the Loan Notes to be listed or dealt in on any stock
exchange. J.P. Morgan and CS First Boston are of the
opinion that, in current market conditions, the value of the
Loan Notes would be not less than 98p per 1 pound of nominal
value.
6
No Loan Notes will be issued unless valid elections for the
Loan Note Alternative will result in the issue of at least
10 million pounds of Loan Notes, or such smaller amount as the
Offeror may decide. In these circumstances, if the Loan
Notes are not issued, NORWEB shareholders who elect for the
Loan Note Alternative will receive cash in accordance with
the basic terms of the Offer.
The Loan Notes will not be offered, sold or delivered,
directly or indirectly, in or into the United States,
Australia or Japan.
The Loan Note Alternative is conditional on the Offer
becoming or being declared unconditional in all respects.
NORWEB American Depositary Shares and US dollar election
It is intended that arrangements will be made to enable
holders of NORWEB ADSs to accept the Offer in respect of
their holdings of NORWEB ADSs. In addition, NORWEB
shareholders and holders of NORWEB ADSs validly accepting
the Offer will be able to elect to receive US dollars
instead of pounds sterling in respect of the cash
consideration due under the Offer (but not in respect of the
Special Dividend). Holders of NORWEB ADSs who are US
persons will not be entitled to receive the Loan Note
Alternative.
The Offer values each NORWEB ADS at 31.50 pounds inclusive of
the Special Dividend. For illustrative purposes only, assuming
an exchange rate of 1 pound = $1.5722 (the prevailing rate
at 12 noon New York City time on 27 September, 1995, the day
prior to announcement of the Offer), the Offer values each
NORWEB ADS at approximately $49.50 inclusive of the Special
Dividend.
The Special Dividend
As soon as practicable after the Offer becomes wholly
unconditional, NORWEB will pay a Special Dividend of 200p
(net) per NORWEB Share to NORWEB shareholders on the
register at the close of business on a date which will be
specified in the offer document and which will be after the
date on which the offer document is despatched.
Application will be made by NORWEB for a clearance under
Section 703 Income and Corporation Taxes Act 1988 in
relation to the Special Dividend. Neither the Offer nor the
Special Dividend will be conditional on such clearance being
obtained and such clearance may not extend to shareholdings
acquired after 27 September, 1995 (the last dealing day
prior to the date of this announcement).
If the flotation of the National Grid is effected and NORWEB
distributes shares in National Grid to NORWEB shareholders
by reference to a date prior to the Special Dividend being
paid, the amount per NORWEB Share under the Offer will be
adjusted in the manner described under the paragraph headed
"Information on National Grid" below.
Background to the Offer
On 8 September, 1995 North West Water announced its
unsolicited offer for NORWEB. The Board of NORWEB urged
shareholders to take no action and announced that it was in
discussions with other parties. The Board of NORWEB has
been pursuing such discussions with Houston and CSW.
Following the satisfactory conclusion of these discussions,
the Board of NORWEB has unanimously recommended the Offer
from Houston and CSW.
7
The Board of NORWEB has made its recommendation after
consideration of all the relevant issues, including the
following:
* The Offer, together with the Special Dividend,
significantly exceeds the value of the full cash alternative
offered by North West Water;
* From its contacts with Houston and CSW, the Board has
derived great comfort that the prospects for the business of
NORWEB under their ownership will be enhanced. Houston and
CSW have stated that they will support and reinforce
NORWEB's position as a flagship utility, managed from the
North West, with a focus on customer service and value;
* Houston and CSW will be able to assist NORWEB in the
development of related businesses, such as international
power generation and gas supply, and in the encouragement of
investment in the North West;
* The value of the share element of North West Water's
offer may be adversely affected by:
* Any shortfall in the scale or timing of the delivery of
synergy benefits claimed by North West Water, or the
magnitude of the costs involved in achieving them;
* Any inability by North West Water to retain such
synergy benefits solely for the benefit of North West
Water's shareholders during the period envisaged by it;
* Changes to the regulatory environment for electricity
and water utilities; and
* The perception of the financial risks associated with a
1.6 billion pounds diversification into an activity in which
North West Water has no direct experience, against the
background of its own current and future cash commitments.
Both Houston and CSW have for some years been active in
examining opportunities for investing in international
electric utilities. The acquisition of NORWEB offers both
Houston and CSW the opportunity to develop a significant
earnings stream outside their core US service territories.
8
Houston and CSW are co-participants in a large generating
plant in the United States and have co-operated in other
ventures. Both companies believe that their combined
financial strength and similar management philosophies will
create an ideal platform for the development of NORWEB's
domestic and international activities.
Houston and CSW expect that the utility operations of NORWEB
will benefit significantly from the sharing of technical
knowledge and best practices. The experiences of NORWEB
should also be of benefit to the utility operations of
Houston and CSW. All three organisations have proven
operational capabilities, and place great value on providing
reliable service at the lowest price consistent with sound
business practice and regulatory requirements. Houston and
CSW also intend to make full use of their combined
experience in the US to assist in attracting further new
investment into NORWEB's service territory.
Regulation
The Offer gives rise to a merger situation qualifying for
investigation within the meaning of the Fair Trading Act
1973. It is therefore conditional on an announcement being
made indicating, in terms satisfactory to the Offeror, that
it is not the intention of the Secretary of State to refer
the Offer, or any matters arising therefrom or relating
thereto, to the Monopolies and Mergers Commission. In that
connection, Houston, CSW and NORWEB will be making
submissions to the Director General of Fair Trading and the
DGES.
NORWEB is the holder of licences issued under the
Electricity Act 1989. These licences do not contain change
of control provisions. It is, however, open to the DGES to
seek modification of these licences at any time by agreement
with the licensee or, in the absence of agreement, following
a reference to the Monopolies and Mergers Commission under
the Electricity Act 1989. The Offer will be conditional on
indications being given by the DGES that it is not his
intention to seek modifications to such licences held by
NORWEB and on NORWEB not agreeing to any modification,
except in either case on terms satisfactory to the Offeror,
and also on the DGES not seeking undertakings from any
member of the Offeror Group or the NORWEB Group except on
terms satisfactory to the Offeror. In this connection,
Houston, CSW and NORWEB will be notifying the DGES of the
Offer.
Employees
Houston and CSW have given assurances to the Board of NORWEB
that the existing employment rights, including existing
pension rights, of all NORWEB employees, and the existing
pension rights of pensioners and deferred pensioners of the
NORWEB Group, will be fully safeguarded.
NORWEB Share Option Schemes
The Offer will extend to any shares in NORWEB allotted or
issued prior to the date on which the Offer closes (or such
earlier date, not being earlier than the date on which the
Offer becomes unconditional as to acceptances or, if later,
the first closing date of the Offer, as the Offeror may
determine) as a result of the exercise of options granted
under the NORWEB Share Option Schemes. Appropriate
proposals will be made to optionholders under the NORWEB
Share Option Schemes in due course. It is intended to
provide an element of compensation for the optionholders
under the NORWEB Sharesave Scheme who are due to complete
their savings plans in 1996, to the extent that they do not
do so.
9
Information on the Offeror
The Offeror has been formed in order to implement the Offer
on behalf of Houston and CSW. The Offeror is owned 50 per
cent. by a subsidiary of Houston and 50 per cent. by a
subsidiary of CSW.
Information on Houston and CSW
Houston
HI Energy is responsible for Houston's electric industry
investments outside the territory served by HL&P and is
engaged in both domestic US and international electricity
markets. It has an ownership and operating position in two
distribution systems in Argentina, one serving 250,000
customers in La Plata, the provincial capital of Buenos
Aires Province, and the other serving approximately 100,000
customers in the large rural province of Santiago del
Estero. HI Energy is participating in two waste-to-energy
power plants in Illinois; in the construction and operation
of a cogeneration plant at a steel mill in Argentina; and in
the construction and operation of a petroleum coke calcining
plant in India, which will sell excess electricity to local
industries. HI Energy also has a concession to construct a
coal power plant in India and is providing operations and
maintenance services for a Shell Oil Company cogeneration
facility at a petrochemical plant near Houston, Texas. HI
Energy will be responsible for managing Houston's investment
in NORWEB.
Houston is a holding company involved in the electric
utility business in the US and international markets. It
has two principal subsidiaries: HL&P and HI Energy. In the
year ended 31 December, 1994, Houston reported consolidated
net income of $399.3 million on revenues from continuing
operations of $3,746.1 million. Earnings per share were
$3.25 and dividends per share were $3.00. Total assets as
of 31 December, 1994, restated for the sale of KBLCOM,
Houston's former cable television subsidiary, were
approximately $11.4 billion.
Houston was formed in 1976 as a holding company for HL&P to
enable Houston to enter into diversified US and
international businesses. Houston and its predecessor
companies have been in the electric utility business since
1882. Houston's common stock is quoted on the New York and
Chicago Stock Exchanges, and on SEAQ International in
London. Houston has a market equity capitalisation of
approximately $5.5 billion.
HL&P generates, transmits and distributes electricity for
more than 1.5 million customers on the Gulf Coast of Texas.
It has a service area of approximately 5,000 square miles,
including Houston, the fourth largest city in the US. HL&P
is the ninth largest electric utility in the US in terms of
kilowatt hour sales. As of 31 December, 1994, HL&P owned
plant with an installed net generating capability of 13,666
MW. Sales for the year ended 31 December, 1994 were
approximately 61.3 billion kWh.
Houston was formerly involved in the ownership and operation
of cable television systems in the US. In order to focus on
its electric businesses, Houston recently sold its cable
television operations to Time Warner for a purchase price of
approximately $2.4 billion.
As of 20 September, 1995, the Houston Group had 9,206 full-
time employees.
CSW
CSW is a public utility holding company which owns four
electric operating subsidiaries: Central Power and Light
Company, Public Service Company of Oklahoma, Southwestern
Electric Power Company and West Texas Utilities Company. In
the year ended 31 December, 1994, CSW reported consolidated
10
net income of $412 million on revenues of $3,623 million.
Earnings per share were $2.08 and dividends per share were
$1.70. Total assets as of 31 December, 1994 were
approximately $10.9 billion.
CSW was incorporated as a holding company in 1925. CSW's
subsidiary companies have been in the electric utility
business since 1888. CSW is quoted on the New York and
Chicago Stock Exchanges and has a market capitalisation of
approximately $4.9 billion.
The four electric utility subsidiaries of CSW generate,
transmit and distribute electricity for approximately 1.7
million customers in the states of Texas, Oklahoma,
Louisiana and Arkansas. They cover a service area of
approximately 152,000 square miles, which is the second-
largest area served by any electric utility system in the
United States. CSW is one of the 15 largest electric
utility companies in the United States in terms of kilowatt
hour sales. As of 31 December, 1994, CSW owned plant with a
generating capacity of 13,620 MW. Sales for the year ended
31 December, 1994 were approximately 57.3 billion kWh.
CSW Enterprises is a business unit of CSW which includes the
following companies:
Transok, Inc., CSW's largest non-utility subsidiary, is a
fully integrated natural gas gathering, transmission,
processing, storage and marketing company which transports
natural gas for and sells natural gas to CSW electric
operating subsidiaries as well as to non-affiliates; and
CSW Energy, Inc. is responsible for the development and
operation of non-utility power projects in the United
States. CSW Energy currently has four projects in operation
in the US domestic independent power and cogeneration
market, and continues actively to pursue other domestic
development opportunities.
CSW International, Inc. is actively engaged in the pursuit
of electricity industry investments outside the United
States. A subsidiary of CSW International holds CSW's
interest in the Offeror.
CSW has recently formed CSW Communications, Inc. to expand
services to its customers through fibre optics and other
telecommunication technologies in addition to operating
CSW's own telecommunications networks.
As of 31 December, 1994, the CSW Group had 8,055 full-time
employees.
Information on NORWEB
NORWEB is one of the twelve RECs which came into existence
as a result of the restructuring and subsequent flotation of
the electricity industry in 1990. Its main business is the
distribution and supply of electricity to the North West of
England, including Manchester, the Lake District and part of
the Pennines. NORWEB is also involved in certain non-
regulated activities, including generation, electrical
retailing, gas supply, electrical contracting and telecoms.
NORWEB's electricity business is subject to the regulatory
licensing regime established by the Electricity Act 1989.
In the year ended 31 March, 1995, NORWEB reported a
consolidated profit before tax of 205.4 million pounds on
turnover of 1,510.6 million pounds. Earnings per share were
95.3p and net dividends per share amounted to 28.4p.
11
Information on National Grid
NORWEB owns approximately 8.2 per cent. of NGH. NGH is the
holding company of The National Grid Company plc which
operates the electrical transmission system in England and
Wales and the interconnection assets which link the national
grid with the transmission systems in Scotland and France.
As the controller of the national grid and sole holder of a
transmission licence, The National Grid Company plc has an
effective monopoly over the transmission of electricity at
high voltage in England and Wales.
For the year ended 31 March, 1995, The National Grid Company
plc reported a consolidated profit before tax of 611
million pounds on turnover of 1,428 million pounds. Net
dividends for the year amounted to 162 million pounds.
If the flotation of the National Grid is effected and NORWEB
distributes shares in National Grid to NORWEB shareholders
by reference to a date prior to the Special Dividend being
paid, the Panel has agreed in principle that the Special
Dividend and the Offer will be adjusted to take account of
the value NORWEB shareholders receive in the distribution
calculated by reference to the value of National Grid. The
Special Dividend will be reduced by up to 100p (net) per
NORWEB Share and the cash consideration per NORWEB Share
under the Offer will be reduced by up to 71p. In that event
NORWEB shareholders will be entitled to retain the shares in
National Grid distributed to them.
Disclosure of interests in NORWEB
Neither Houston nor CSW, nor any of the directors of Houston
or CSW, nor, so far as Houston and CSW are aware, any party
acting in concert with Houston or CSW, owns or controls any
NORWEB Shares or holds any options to purchase NORWEB
Shares. In the interests of secrecy, Houston and CSW have
not made any enquiries in this respect of certain parties
who may be deemed by the Panel to be acting in concert with
it for the purposes of the Offer.
Houston and CSW have entered into an agreement regulating
the conduct of the Offer. This agreement requires Houston,
CSW and certain of their associates not to acquire NORWEB
Shares without the prior approval of Houston and CSW, except
NORWEB Shares acquired by the Offeror pursuant to the Offer.
Offer documentation
J.P. Morgan and CS First Boston, on behalf of the Offeror,
will despatch the formal offer documents in due course.
12
Appendix 1
Conditions and certain further terms of the Offer and the
Alternatives
The Offer will comply with the applicable rules and
regulations of the London Stock Exchange and the Code and
the rules and regulations promulgated under the US
Securities Exchange Act of 1934 (as amended).
Part A: Conditions of the Offer
The Offer will be subject to the following conditions:
(A) Valid acceptances being received (and not, where
permitted, withdrawn) by, at the latest, 3.00 p.m.
(London time) on the first closing date of the Offer
(or such later time(s) and/or date(s) as the Offeror
may, subject to the rules of the Code, decide), in
respect of not less than 90 per cent. in nominal value
(or such lesser percentage as the Offeror may decide)
of the NORWEB Shares to which the Offer relates,
provided that this condition shall not be satisfied
unless the Offeror shall have acquired or agreed to
acquire, pursuant to the Offer or otherwise, shares in
NORWEB carrying in aggregate more than 50 per cent. of
the voting rights normally exercisable at general
meetings of NORWEB. For the purposes of this
condition:
(i) the expression "NORWEB Shares to which the Offer
relates" shall mean the aggregate of (a) the
NORWEB Shares which have been unconditionally
allotted or issued on or before the date of the
Offer and (b) the NORWEB Shares unconditionally
allotted or issued after the date of the Offer but
on or before the date on which the Offer becomes
or is declared unconditional as to acceptances but
excluding NORWEB Shares which at the date of the
Offer are held by the Offeror and/or its
associates (within the meaning of Section 430E of
the Companies Act 1985) or which, at such date,
the Offeror and/or its associates have (otherwise
than under such a contract as is described in
Section 428(5) of the Companies Act 1985)
contracted to acquire; and
(ii) shares which have been unconditionally allotted
shall be deemed to carry the voting rights which
they will carry on issue;
(B) An announcement being made by the UK Office of Fair
Trading indicating in terms satisfactory to the Offeror
that it is not the intention of the Secretary of State
for Trade and Industry to refer the proposed
acquisition of NORWEB by the Offeror, or any matter
arising therefrom, to the Monopolies and Mergers
Commission;
(C) The Public Utility Commission of Texas not having
revised or withdrawn its certification to the US
Securities and Exchange Commission, for the purpose of
Houston's exemption from regulation under the US Public
Utility Holding Company Act of 1935 (as amended), that
it has the authority and resources to protect the
ratepayers of HL&P from any adverse consequences of any
member of the Houston Group's investment in foreign
utilities and that it intends to exercise that
authority;
(D) The Director General of Electricity Supply indicating
in terms satisfactory to the Offeror that:
(i) with the exception of the proposed modifications
announced by him on 6 July, 1995, it is not his
intention to seek any modification to one or more
of the licences held by NORWEB under the
Electricity Act 1989 and NORWEB not agreeing to
any such modification except, in either case, on
terms satisfactory to the Offeror; and
13
(ii) he will give such consents and/or directions (if
any) and seek such modifications (if any) as are
necessary or appropriate with respect to such
licences in connection with the Offer or the
acquisition by the Offeror of NORWEB Shares in
each case on terms satisfactory to the Offeror;
(E) The Director General of Electricity Supply not seeking
undertakings or assurances from any member of the
Offeror Group or any member of the NORWEB Group except
on terms satisfactory to the Offeror;
(F) NORWEB's consent (announced by it on 28 July, 1995) to
the modifications to the licence held by it under the
Electricity Act 1989 proposed by the Director General
of Electricity Supply on 6 July, 1995 remaining in
full force and effect;
(G) No government or governmental, quasi-governmental,
supranational, statutory or regulatory body or trade
agency, professional body, association, institution or
environmental body, or any court or other body in any
jurisdiction having instituted or threatened and there
not continuing to be outstanding any action,
proceedings, suit, investigation or enquiry, or having
enacted, made or proposed any statute, regulation or
order that would or might reasonably be expected to:
(i) make the Offer or the acquisition of any NORWEB
Shares, or the acquisition of control of NORWEB by
the Offeror Group, void, unenforceable or illegal
or directly or indirectly restrict, prohibit,
delay or otherwise adversely interfere with the
implementation of, or impose additional adverse
conditions or obligations with respect to, or
otherwise challenge, the Offer or the acquisition
of any NORWEB Shares, or the acquisition of
control of NORWEB by the Offeror Group;
(ii) require or prevent a divestiture by any member of
the Offeror Group of any NORWEB Shares;
(iii) require or prevent the divestiture by any
member of the Offeror Group or by any member of
the NORWEB Group of all or any part of their
respective businesses, assets or properties or
impose any limitation on the ability of any of
them to conduct their respective businesses or to
own any of their respective assets or properties;
(iv) impose any limitations on the ability of the
Offeror Group to acquire or hold or to exercise
effectively, directly or indirectly, all or any
rights of ownership of NORWEB Shares or the
equivalent in any member of the NORWEB Group or to
exercise management control over any such member;
(v) require any member of the Offeror Group or any
member of the NORWEB Group to offer to acquire any
shares in any member of the NORWEB Group owned by
any third party;
(vi) affect adversely the business of any member of the
Offeror Group or any member of the NORWEB Group to
an extent which is material in the context of the
NORWEB Group; or
(vii) otherwise adversely affect the financial
position of the NORWEB Group,
and all applicable waiting periods during which any
such government, public body, agency or court could
institute any such action, proceedings, suit,
investigation or enquiry having expired or been
terminated;
14
(H) All necessary filings having been made in connection
with the Offer and all required authorisations, orders,
grants, recognitions, confirmations, consents,
clearances, licences, permissions, exemptions and
approvals (including, without limitation, any clearance
required under the United States Public Utility Holding
Company Act of 1935 (as amended) and the Public Utility
Regulatory Act of the State of Texas) necessary or
appropriate for or in respect of the Offer (including,
without limitation, its implementation and financing
(which term includes, without limitation, any borrowing
of any moneys, the entry into any underwriting
agreement, the giving of any guarantee or security and
the investment of the proceeds thereof or any other
moneys by any member of the Houston Group or the CSW
Group in the Offeror and the Offeror's investment in
NORWEB Shares)) or the proposed acquisition of any
shares in, or control of, NORWEB by the Offeror Group
being obtained on terms and in a form reasonably
satisfactory to the Offeror from appropriate
governments, governmental, quasi-governmental,
supranational, statutory or regulatory bodies, trade
agencies, professional bodies, associations,
institutions, environmental bodies and courts
(including, without limitation, the US Securities and
Exchange Commission and the Public Utilities Commission
of State of Texas), and such authorisations, orders,
grants, recognitions, confirmations, consents,
clearances, licences, permissions, exemptions and
approvals remaining in full force and effect at the
time at which the Offer becomes otherwise unconditional
in all respects and no notice of any intention to
revoke, suspend, restrict, modify or not renew any of
the same having been received and all necessary filings
having been made and all appropriate waiting periods
under any applicable legislation and regulations in any
jurisdiction having expired or been terminated, in each
case as may be necessary in connection with the Offer
under the laws or regulations of any jurisdiction and
all necessary statutory or regulatory obligations in
any jurisdiction having been complied with;
(I) There being no provision of any agreement, arrangement,
licence or other instrument to which any member of the
NORWEB Group or any partnership or company in which any
member of the NORWEB Group has a substantial interest
(being a direct or indirect interest in 20 per cent or
more of the voting equity capital thereof (an
"associate")) is a party or by or to which any such
member or associate or any of their assets may be bound
or be subject which, as a result of the acquisition by
the Offeror Group of the NORWEB Shares or any of them,
or the acquisition of control of NORWEB by the Offeror
Group will, could or might reasonably be expected to
result in:
(i) any moneys borrowed by, or any other indebtedness
(actual or contingent) of, any such member or
associate becoming repayable or capable of being
declared repayable immediately or earlier than the
repayment date stated in such arrangement,
agreement, licence or other instrument or the
ability of any such member or associate to borrow
a material amount of money or incur any material
indebtedness being withdrawn or inhibited;
(ii) any such arrangement, licence or other instrument
being terminated or materially and adversely
modified or any onerous obligation arising or any
adverse action being taken or arising thereunder;
(iii) the interest or business of any such member
or associate in or with any other person, firm or
company (or any arrangements relating to such
interests or business) being adversely affected;
(iv) any assets of any such member or associate being
or falling to be disposed of or charged otherwise
than in the ordinary course of business;
(v) the creation of any mortgage, charge or other
security over the whole or any part of the
business, property or assets of any such member or
associate, or any such security (wherever arising
or having arisen) becoming enforceable; or
15
(vi) the respective financial or trading prospects of
any such member or associate being adversely
affected;
(J) No member of the NORWEB Group having since 31 March,
1995 (save as disclosed in the annual report and
accounts of NORWEB for the year ended 31 March, 1995)
or otherwise announced on or before 27 September 1995
on the London Stock Exchange (such information being
"publicly announced"):
(i) (save as between NORWEB and wholly-owned
subsidiaries of NORWEB or upon the exercise of
rights to subscribe for NORWEB Shares pursuant to
the exercise of options granted under any of the
NORWEB Share Option Schemes) issued or authorised
or proposed the issue of additional shares of any
class, or securities convertible into, or rights,
warrants or options to subscribe for or acquire,
any such shares or convertible securities or
redeemed, purchased or reduced any part of its
share capital;
(ii) declared, paid or made or proposed to declare, pay
or make any bonus, dividend or other distribution
in respect of the share capital of NORWEB save for
the Special Dividend;
(iii) authorised or proposed or announced an
intention to propose any merger or demerger or
acquisition or disposal of assets or shares
(otherwise than in the ordinary course of
business);
(iv) authorised or proposed or announced its intention
to propose any change in its share or loan
capital;
(v) announced any proposal to purchase any of its own
shares or purchased any such shares;
(vi) issued or proposed the issue of any debentures or
(save in the ordinary course of business) incurred
any indebtedness or contingent liability which is
material in the context of the NORWEB Group as a
whole;
(vii) entered into any contract or commitment
(whether in respect of capital expenditure or
otherwise) which is of a long term or unusual
nature or which involves or could involve an
obligation of a nature or magnitude which is
material in the context of the NORWEB Group as a
whole;
(viii) entered into or varied the terms of any
service agreement with any of the directors of
NORWEB other than in the ordinary course of
business;
(ix) disposed of or transferred, mortgaged or
encumbered any assets or any right, title or
interest in any assets or entered into any
contract, transaction, reconstruction or
arrangement otherwise than in the ordinary course
of business;
(x) waived or compromised any claim other than in the
ordinary course of business;
(xi) proposed any voluntary winding up; or
(xii) entered into any contract, commitment or
agreement with respect to any of the transactions
or events referred to in this paragraph;
(K) Since 31 March, 1995, and save as disclosed in the
annual report and accounts of NORWEB for the year ended
31 March, 1995 or save as publicly announced on or
before 27 September 1995:
16
(i) no adverse change in the business, financial or
trading position or profits or assets or prospects
of the NORWEB Group having occurred; and
(ii) no contingent liability having arisen which would
or might reasonably affect any member of the
NORWEB Group;
(L) Since 31 March, 1995, and save as disclosed in the
annual report and accounts of NORWEB for the year ended
31 March, 1995 or save as publicly announced on or
before 27 September 1995, no arbitration proceedings,
prosecution or other legal proceedings having been
instituted or threatened by or against or remaining
outstanding against any member of the NORWEB Group
(whether as plaintiff or defendant or otherwise),
which, in any case, is or are adverse to and material
in the context of the NORWEB Group taken as a whole;
(M) The Offeror not having discovered that:
(i) any financial or business information concerning
the NORWEB Group which has been publicly announced
at any time by any member of the NORWEB Group is
misleading, contains a misrepresentation of fact
or omits to state a fact necessary to make the
information contained therein not materially
misleading and which was not, if material,
corrected by subsequent public announcement made
on or before 27 September 1995; or
(ii) any partnership or company in which any member of
the NORWEB Group has a significant economic
interest and which is not a subsidiary of NORWEB
is subject to any liability, contingent or
otherwise, which is not disclosed in the annual
report and accounts of NORWEB for the year ended
31 March, 1995 or publicly announced, such
liability being material in the context of the
NORWEB Group taken as a whole; and
(N) In relation to any release, emission, disposal or other
fact or circumstance which causes or might cause
pollution of the environment or harm to human health,
no past or present member of the NORWEB Group having,
in any manner which is material in the context of the
NORWEB Group:
(i) committed any violation of any laws, statutes,
ordinances, regulations of any government or
governmental, quasi-governmental, supranational,
statutory, regulatory or environmental body, or
any court or other body in any jurisdiction; or
(ii) incurred any liability (whether actual or
contingent) to any of the foregoing.
The Offeror reserves the right to waive, in whole or in
part, all or any of the above conditions apart from
condition (A). The Offer will lapse unless all the above
conditions have been fulfilled or (if capable of waiver)
waived or, where appropriate, have been determined by the
Offeror in its reasonable opinion to be or remain satisfied,
by no later than 21 days after the later of the first
closing date of the Offer and the date on which the Offer
becomes or is declared unconditional as to acceptances or
such later date as the Panel may agree. The Offeror will be
obliged to waive or treat as fulfilled conditions (I) to (N)
inclusive if and when the Offer becomes or is declared
unconditional as to acceptances provided that, at such time,
no circumstances have arisen and no event has occurred which
breaches any such conditions or which causes any of such
conditions to be incapable of fulfilment but, subject
thereto, the Offeror shall be under no obligation to waive
or treat as fulfilled any of the conditions (B) to (N)
inclusive by a date earlier than the latest date specified
above for the fulfilment thereof notwithstanding that the
other conditions of the Offer may at such earlier date have
been fulfilled and that there are at such earlier date no
circumstances indicating that any of such conditions may
have been breached or may not be capable of fulfilment.
The Offer will lapse if the acquisition of NORWEB by the
Offeror is referred to the Monopolies and Mergers Commission
before 3.00 p.m. (London time), 10.00 a.m. (New York City
time) on the first closing date of the Offer or, if later,
17
the date on which the Offer becomes unconditional as to
acceptances, and if the Offer so lapses the Offer will cease
to be capable of further acceptance and the Offeror and
accepting NORWEB shareholders will cease to be bound by
forms of acceptance submitted before the time when the Offer
lapses.
If the Offeror is required by the Panel to make an offer for
NORWEB Shares under the provisions of Rule 9 of the Code,
the Offeror may make such alterations to the above
conditions as are necessary to comply with the provisions of
that Rule.
Part B: Certain further terms of the Offer
The Offer will not be made in Japan.
The Loan Notes to be issued pursuant to the Offer have not
been and will not be registered under the United States
Securities Act of 1933 (as amended) nor under any of the
relevant securities laws of Australia or Japan.
Accordingly, unless an exemption under such Act or relevant
securities law is applicable, the Loan Notes may not be
offered, sold or delivered, directly or indirectly, in or
into the United States, Australia or Japan.
The Loan Note Alternative is conditional upon the Offer
becoming wholly unconditional.
18
Appendix 2
Financial Effects of Acceptance
The following tables show, for illustrative purposes only
and on the bases and assumptions set out in Appendix 3, the
financial effects of acceptance of the Offer on value and
income for an accepting holder of 10 NORWEB Shares, if the
Offer becomes unconditional in all respects.
Increase in capital value
Cash consideration 85.00 pounds
Special Dividend (net) 20.00 pounds
Total 105.00 pounds
Market value of 10 NORWEB Shares on 21 June, 1995 69.30 pounds
Increase in capital value 35.70 pounds
Representing an increase of 51.5%
Increase in gross income
Gross income from re-investment of cash
consideration 6.49 pounds
Gross income from re-investment of Special
Dividend 1.53 pounds
Total 8.01 pounds
Gross dividend income on 10 NORWEB Shares 3.55 pounds
Increase in income 4.46 pounds
Representing an increase of 125.7%
19
Appendix 3
Bases and Sources
(i) The middle market price of a NORWEB Share on 21 June,
1995 is derived from the Daily Official List of the
London Stock Exchange;
(ii) The value of the full cash alternative offered by North
West Water for NORWEB is taken from the offer document
published on 18 September, 1995;
(iii) The value of the whole of the fully diluted share
capital of NORWEB is based upon 156,071,675 NORWEB
Shares in issue on 8 September, 1995 and the 4,163,454
NORWEB ordinary shares which are the subject of options
granted under the NORWEB Share Option Schemes;
(iv) The pounds/US dollar exchange rate prevailing at 12 noon
New York City time on 27 September, 1995 is derived from
Reuters page 1FEE;
(v) The cash consideration and the Special Dividend are
each assumed to be re-invested so as to yield 7.63 per
cent. gross per annum, being the yield on the FT
Actuaries Medium Coupon Fixed Interest Index for
securities up to five years maturity on 26 September,
1995;
(vi) The income from NORWEB Shares is based on the total
annual dividend of 28.4p (net) per NORWEB Share paid in
respect of the year ended 31 March, 1995, together with
the associated tax credit of 20/80ths of that dividend;
(vii) Except where expressly stated, no account has been
taken of the tax credit relating to the Special
Dividend which may be reclaimed by certain
shareholders;
(viii) No account has been taken of any liability to
taxation or the treatment of fractions;
(ix) Unless otherwise stated, the information on Houston is
extracted from Houston's 1994 Annual Report and its
most recent Forms 10-K, 10-Q and 8-K filed with the US
Securities and Exchange Commission or has been supplied
by Houston;
(x) Unless otherwise stated, the information on CSW is
extracted from CSW's 1994 Annual Report and its most
recent Forms 10-K, 10-Q and 8-K filed with the US
Securities and Exchange Commission or has been supplied
by CSW;
(xi) Unless otherwise stated, the information on NORWEB is
extracted from NORWEB's Annual Report and Accounts for
the year ended 31 March, 1995 or has been supplied by
NORWEB;
(xii) Numbers in Appendix 2 may not, owing to rounding,
add up to the totals detailed therein.
20
Appendix 4
Definitions
"Act" The Companies Act 1985 as amended
by The Companies Act 1989
"Code" The City Code on Takeovers and Mergers
"CS First Boston" CS First Boston Limited, which is acting
as financial adviser to CSW and as joint
financial adviser to the Offeror
"CSW" Central and South West Corporation
"CSW Group" Central and South West Corporation and
its subsidiaries and subsidiary
undertakings
"DGES" The Director General of Electricity Supply
"Houston" Houston Industries Incorporated
"Houston Group" Houston Industries Incorporated and its
subsidiaries and subsidiary undertakings
"HI Energy" Houston Industries Energy, Inc.
"HL&P" Houston Lighting & Power Company
"J.P. Morgan" Morgan Guaranty Trust Company of New
York, which is acting as financial
adviser to Houston and as joint
financial adviser to the Offeror
"LIBOR" the average (rounded down where
necessary to the nearest whole multiple
of one sixteenth of one per cent.) of
the respective rates per annum at which
any two London Clearing Banks selected
by the Offeror are prepared to offer six
months sterling deposits of 1,000,000
pounds to leading banks in the London
Inter-bank Market for sterling at or about
11.00 a.m. (London time) on the first
day of the relevant interest period or,
if such a day is not a business day, on
the next succeeding business day
"Loan Notes" the loan notes of the Offeror to be
issued pursuant to the Loan Note
Alternative
"Loan Note Alternative" the loan note alternative as
described in this announcement, by which
holders of NORWEB Shares who validly
accept the Offer elect to receive Loan
Notes instead of all or part of the cash
consideration otherwise payable under
the Offer
"NatWest Markets" NatWest Markets Corporate Finance
Limited
"NGH" The National Grid Holding plc
21
"North West Water" North West Water Group PLC
"NORWEB" NORWEB plc
"NORWEB ADSs" American Depositary Shares of NORWEB
each representing three NORWEB Shares
"NORWEB Group" NORWEB and its subsidiaries and
subsidiary undertakings
"NORWEB Share Option the NORWEB Executive Share Option
Scheme and the NORWEB Schemes" Sharesave
Scheme
"NORWEB Shares" the existing issued and fully paid
ordinary shares of 50p each in NORWEB
(including those ordinary shares
represented by NORWEB ADSs) and any
further such shares which are
unconditionally allotted or issued
before the date on which the Offer
closes (or such earlier date, not being
earlier than the date on which the Offer
becomes or is declared unconditional as
to acceptances or, if later, the first
closing date of the Offer, as the
Offeror may decide)
"Offer" the offer set out in this document to be
made by J.P. Morgan and CS First Boston
on behalf of the Offeror to acquire the
NORWEB Shares not already owned by the
Offeror and, where the context admits,
any subsequent revision, variation,
extension or renewal thereof
"Offeror" Texas Energy Partners plc
"Offeror Group" the Houston Group, the CSW Group and the
Offeror
"Panel" The Panel on Takeovers and Mergers
"RECs" the regional electricity companies
in England and Wales
"Special Dividend" the proposed special dividend of 200p
(net) per NORWEB Share as referred to in
this announcement
"UK" The United Kingdom
"United States" or "US" The United States of America, its
territories and possessions, any state
of The United States of America and the
District of Columbia
22
