File No. 70-8881
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________
AMENDMENT NO. 2
TO
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
Cinergy Corp.
The Cincinnati Gas & Electric Company
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of companies filing this statement
and addresses of principal executive offices)
Cinergy Corp.
(Name of top registered holding company parent)
William L. Sheafer
Treasurer
Cinergy Corp.
(address above)
(Name and address of agent of service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this statement to:
Jerome A. Vennemann James R. Lance
Associate General Counsel Manager - Corporate Finance
Cinergy Corp. and Financial Risk
(address above) Management
Cinergy Corp.
(address above)
William T. Baker, Jr.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
The Application-Declaration in this proceeding, filed on July 1, 1996, and
amended on July 19, 1996, is hereby amended and restated in its entirety to
read as follows:
Item 1. Description of Proposed Transactions
A. Overview; Requested Authorizations
The Cincinnati Gas & Electric Company ("CG&E"), an Ohio corporation
and wholly-owned utility subsidiary of Cinergy Corp. ("Cinergy"), a
Delaware corporation and registered holding company under the Public
Utility Holding Company Act of 1935 ("Act"), proposes to solicit proxies
from the holders of its outstanding shares of preferred stock and common
stock ("Proxy Solicitation") for use at a special meeting of its
stockholders to be held on or about September 18, 1996 ("Special Meeting")
to consider a proposed amendment to CG&E's amended articles of
incorporation ("Articles") that would eliminate a provision restricting the
amount of unsecured debt issuable by CG&E ("Proposed Amendment"). If the
Proposed Amendment is adopted, CG&E proposes to make a special cash payment
as specified below to each preferred stockholder who voted his or her
shares of preferred stock in favor of the Proposed Amendment, provided that
any such shares have not been tendered pursuant to the concurrent cash
tender offer noted below.
Concurrently with the Proxy Solicitation, Cinergy proposes to make an
offer ("Offer") to the holders of CG&E's outstanding preferred stock of
each series to acquire for cash any and all shares of CG&E preferred stock
of each series, at respective cash purchase prices for shares of each
series as specified below. Cinergy anticipates that the Offer for each
series of preferred stock will be scheduled to expire at 5 P.M. (New York
City time) on the date of the Special Meeting ("Expiration Date").
Preferred Stockholders who wish to tender their Shares pursuant to the
Offer are not required to vote in favor of the Proposed Amendment; however,
among the conditions of the Offer is that the Proposed Amendment be
approved and adopted at the Special Meeting.
Applicants request that the Commission issue a public notice of the
proposed transactions and order authorizing the Proxy Solicitation
(collectively, "Proxy Solicitation Order") by not later than Friday, August
16, 1996, thereby both affording CG&E sufficient time to solicit proxies in
advance of the Special Meeting and, since the Proxy Solicitation and the
Offer will be effected by means of the same core document a combined
proxy statement and issuer tender offer statement under the Securities
Exchange Act of 1934 ("Exchange Act") and applicable rules and regulations
thereunder facilitating commencement of the Offer. Applicants further
request that as soon as practicable after the Proxy Solicitation Order, but
in any event not later than Friday, September 13, 1996, the Commission
issue an order authorizing the Proposed Amendment and Cash Payments
together with Cinergy's proposed acquisition of any and all shares of CG&E
preferred stock pursuant to the Offer.
B. Background: 1995 CG&E Proxy Solicitation in Respect of
Articles Restriction on Unsecured Indebtedness
By order dated September 26, 1995 (Rel. No. 35-26381), the Commission
authorized CG&E to submit to the holders of its outstanding common and
preferred stock, at a special meeting of stockholders to be held on or
about November 16, 1995, proposed amendments to the Articles that would
have suspended for a term of years or eliminated outright the restriction
on unsecured indebtedness referred to above. Adoption of either proposal
required an affirmative two-thirds vote of both the holders of the
outstanding shares of CG&E's preferred stock of all series and Cinergy, as
the holder of all outstanding shares of CG&E common stock. Based on
proxies received prior to the scheduled date of the special meeting, it
became apparent that although both proposals would receive an affirmative
vote of the majority of votes cast, neither would receive the requisite
two-thirds affirmative vote of preferred stockholders./1/ Accordingly, to
forestall additional expenses and inconvenience to shareholders, CG&E
cancelled the special meeting.
As discussed below, the purpose of the Proxy Solicitation is to
eliminate the provision in the Articles restricting the ability of CG&E to
incur unsecured indebtedness. CG&E considers that restriction a
significant impediment to its ability to maintain financial flexibility and
minimize its financing costs, to the detriment of its utility customers
and, indirectly, Cinergy's investors. The ongoing financing flexibility
and cost benefits to be gained by CG&E as a result of elimination of the
Articles provision outweigh the one-time cost of the special cash payments
and the other costs of the Proxy Solicitation. Applicants further believe
that the terms of purchase of outstanding shares of CG&E preferred stock
pursuant to the Offer will benefit not only tendering preferred
stockholders (given the proposed per share purchase price) but also, taking
into account all related transaction costs, Cinergy's investors and system
utility customers by (1) contributing to the elimination of the onerous
Articles provision concerning unsecured indebtedness and (2) resulting in
the acquisition and retirement of outstanding shares of CG&E preferred
stock and their potential replacement with comparatively less expensive
financing alternatives, such as short-term debt.
C. Proposed Transactions: Proxy Solicitation and Proposed Amendment
1. Terms of Proxy Solicitation and Proposed Amendment
CG&E has outstanding 89,663,086 shares of common stock, $8.50 par
value per share ("Common Stock"), all of which are held by Cinergy. CG&E's
outstanding preferred stock consists of two million shares of cumulative
preferred stock, par value $100 per share ("Preferred Stock"), issued in
four series (each, a "Series"),/2/ all of which are listed and traded on
the New York Stock Exchange. The Common Stock and Preferred Stock of each
Series are entitled to one vote per share and constitute CG&E's only
outstanding securities entitled to vote on the Proposed Amendment. CG&E
has outstanding no other class of equity securities, including without
limitation preference stock.
The Articles currently provide that, without the consent of the
holders of not less than a majority of the total number of shares of
Preferred Stock of all series, CG&E shall not issue or assume any
securities representing unsecured debt (other than for purposes of
refunding outstanding unsecured indebtedness or redeeming or otherwise
retiring outstanding shares of stock ranking prior to the Preferred Stock
with respect to the payment of dividends or upon the dissolution,
liquidation or winding up of CG&E) if, immediately after such issue or
assumption, the total outstanding principal amount of all securities
representing unsecured debt would exceed 20% of the aggregate of (1) the
total principal amount of all then-outstanding secured debt of CG&E and (2)
the capital and surplus of CG&E, as stated on CG&E's books ("20%
Provision"). The Proposed Amendment would eliminate the 20% Provision by
deleting it in its entirety from the Articles.
Adoption of the Proposed Amendment requires the affirmative vote at
the Special Meeting (in person by ballot or by proxy) of the holders of not
less than two-thirds of the outstanding shares of each of (1) the Preferred
Stock of all Series, voting together as one class, and (2) the Common
Stock. Cinergy has advised CG&E that it will vote its shares of Common
Stock in favor of the Proposed Amendment. Abstentions and broker non-votes
in respect of the Proposed Amendment will have the effect of votes against
the Proposed Amendment.
Votes at the Special Meeting will be tabulated preliminarily by The
Bank of New York. Inspectors of election, duly appointed by the presiding
officer at the Special Meeting, will definitively count and tabulate the
votes and determine and announce the results at the meeting.
CG&E has engaged MacKenzie Partners, Inc. to act as information agent
in connection with the Proxy Solicitation for a fee and reimbursement of
reasonable out-of-pocket expenses expected not to exceed approximately
$35,000.
If the Proposed Amendment is adopted, CG&E proposes to make a special
cash payment of $1.00 per share (each, a "Cash Payment") to each Preferred
Stockholder of any series any of whose shares of Preferred Stock (each, a
"Share") are properly voted at the Special Meeting (in person by ballot or
by proxy) in favor of the Proposed Amendment, provided that such Shares are
not tendered pursuant to the Offer.
CG&E will disburse Cash Payments out of its general funds, promptly
after adoption of the Proposed Amendment.
2. Benefits of Proposed Amendment
CG&E believes that adoption of the Proposed Amendment is critical to
maximizing its financial flexibility and minimizing its financing costs.
a. Financial Flexibility
Although historically CG&E's debt financing generally has been
accomplished through the issuance of long-term first mortgage bonds and
only a modest amount of short-term debt, CG&E believes that in the long-run
unsecured debt alternatives will increase in importance as an option in
financing its construction program and in refinancing high-cost first
mortgage bonds. The availability and flexibility of unsecured debt is
necessary to take full advantage of changing conditions in securities
markets. In addition, although CG&E's earnings currently are sufficient to
meet the earnings coverage tests that must be satisfied before issuing
additional first mortgage bonds and Preferred Stock, there have been
periods, including virtually all of 1994, when, because of its inability to
meet the earnings coverage test in the Articles, CG&E was unable to issue
any additional Preferred Stock. Given CG&E's desire to continue to rely on
unsecured debt, a similar inability to issue Preferred Stock in the future
may limit CG&E's financing options to either additional first mortgage
bonds (assuming that the applicable earnings coverage test could be met) or
additional Common Stock.
As noted, CG&E's use of short-term debt is constrained by the 20%
Provision. CG&E believes that the prudent use of short-term debt is vital
to effective financial management of its business. Not only is short-term
debt generally the least expensive form of capital, it also provides
flexibility in meeting seasonal fluctuations in cash requirements, acts as
a bridge between issues of permanent capital, and can be used when
unfavorable conditions prevail in the market for long-term capital.
Because the 20% Provision hampers its flexibility in planning and
financing its business activities, CG&E believes that ultimately it will be
at a competitive disadvantage if that restriction is not removed. The
industry's new competitors such as power marketers, independent power
producers, and owners of cogenerating facilities generally are not
subject to similar financing restrictions in their organizational
documents. In recent years, a number of utilities encumbered with charter
restrictions similar to the 20% Provision have eliminated or relaxed such
provisions through successful proxy solicitations./3/ In short, potential
utility competitors of CG&E are not constrained by charter provisions
restricting the use of unsecured debt. Even CG&E's affiliate, PSI Energy,
Inc., is not saddled with a comparable charter restriction.
b. Lower Costs
As stated above, unsecured short-term debt generally represents the
least expensive form of capital. Although short-term debt by its nature
subjects the borrower to potentially greater interest rate volatility, the
cost of short-term debt rarely exceeds the cost of other forms of capital
available at the same time. By increasing its use of short-term debt, it
may be possible for CG&E to lower its cost structure further, making its
energy products more competitive, increasing its earnings, and reducing its
business risks. The 20% Provision impedes CG&E's ability to fully avail
itself of the relative benefits of short-term debt.
With the above benefits in mind, CG&E in 1995 received authorization
from the Public Utilities Commission of Ohio (order dated May 4, 1995 in
Case No. 95-358-GE-AIS) to increase the maximum amount of short-term debt
it is permitted to have outstanding at any one time from $200 million to
$400 million. Under the 20% Provision, CG&E has available only
approximately $150 million of unsecured debt capacity (short-term or
otherwise), based on capitalization as of March 31, 1996.
Reference is made to Exhibits B-1 (draft Proxy Statement and Offer to
Purchase), B-2 (draft Notice of Special Meeting) and B-3 (draft form of
Proxy) for more detailed information with respect to the Proxy Solicitation
and Proposed Amendment.
D. Proposed Transactions: Offer
1. Terms of Offer
Concurrently with the commencement of the Proxy Solicitation, subject
to the terms and conditions stated in the Offer to Purchase and Proxy
Statement and the accompanying Letters of Transmittal and Proxy (see
Exhibits B-1 and B-4) (collectively, "Offer Documents"), Cinergy proposes
to make the Offer, pursuant to which it will offer to acquire from the
holders of the Preferred Stock of each Series any and all Shares of that
Series at the following cash purchase prices: $64 per share, in the case
of the 4% Series; $80 per share, in the case of the 4-3/4% Series; $110 per
share, in the case of the 7-3/8% Series; and $116 per share, in the case of
the 7-7/8% Series (each, a "Purchase Price"). Cinergy anticipates that the
Offer for each series of Preferred Stock will be scheduled to expire at 5
P.M. (New York City time) on the date of the Special Meeting (i.e.,
September 18, 1996). As noted below, the Expiration Date may be extended
under certain circumstances.
The Offer consists of separate offers for each of the four Series,
with the offer for any one Series being independent of the offer for any
other Series. The applicable Purchase Price and the other terms and
conditions of the Offer apply equally to all Preferred Stockholders of the
respective Series. The Offer is not conditioned upon any minimum number of
Shares of the applicable Series being tendered, but is conditioned, among
other things, on the Proposed Amendment being adopted at the Special
Meeting.
To tender shares in accordance with the terms of the Offer Documents,
the tendering Preferred Stockholder must either (1) send to The Bank of New
York, in its capacity as depositary for the Offer ("Depositary"), a
properly completed and duly executed Letter of Transmittal and Proxy or
facsimile thereof for that Series, together with any required signature
guarantees and any other documents required by the Letter of Transmittal
and Proxy, and either (a) certificates for the Shares to be tendered must
be received by the Depositary at one of its addresses specified in the
Offer Documents, or (b) such Shares must be delivered pursuant to the
procedures for book-entry transfer described in the Offer Documents (and a
confirmation of such delivery must be received by the Depositary), in each
case by the Expiration Date; or (2) comply with a guaranteed delivery
procedure specified in the Offer Documents./4/ Tenders of Shares made
pursuant to the Offer may be withdrawn at any time prior to the Expiration
Date. Thereafter, such tenders are irrevocable, subject to certain
exceptions identified in the Offer Documents.
Cinergy's obligation to proceed with the Offer and to accept for
payment and to pay for any Shares tendered is subject to various conditions
enumerated in the Offer Documents, including, among other conditions, that
the Proposed Amendment be adopted at the Special Meeting and that the
Commission issue an order under the Act authorizing the proposed
transactions.
At any time or from time to time, Cinergy may extend the Expiration
Date applicable to any Series by giving notice of such extension to the
Depositary, without extending the Expiration Date for any other Series.
During any such extension, all Shares of the applicable Series previously
tendered will remain subject to the Offer, and may be withdrawn at any time
prior to the Expiration Date as extended.
Conversely, Cinergy may elect in its sole discretion to terminate the
Offer prior to the scheduled Expiration Date and not accept for payment and
pay for any Shares tendered, subject to applicable provisions of Rule 13e-4
under the Exchange Act requiring Cinergy either to pay the consideration
offered or to return the Shares tendered promptly after the termination or
withdrawal of the Offer, upon the occurrence of any of the conditions to
closing enumerated in the Offer Documents, by giving notice of such
termination to the Depositary and making a public announcement thereof.
Subject to compliance with applicable law, Cinergy further reserves
the right in the Offer Documents, in its sole discretion, to amend the
Offer in any respect by making a public announcement thereof. If Cinergy
materially changes the terms of the Offer or the information concerning the
Offer, or if it waives a material condition of the Offer (such as the
condition that the Proposed Amendment be adopted at the Special Meeting),
Cinergy will extend the Expiration Date to the extent required by the
applicable provisions of Rule 13e-4 under the Exchange Act. Those
provisions require that the minimum period during which an issuer tender
offer must remain open following material changes in the terms of the offer
or information concerning the offer (other than a change in price or change
in percentage of securities sought) will depend on the facts and
circumstances, including the relative materiality of such terms or
information. If the Offer is scheduled to expire at any time earlier than
the expiration of a period ending on the tenth business day from, and
including, the date that Cinergy notifies Preferred Stockholders that it
will (a) increase or decrease the price it will pay for Shares or (b)
decrease the percentage of Shares it seeks, the Expiration Date will be
extended until the expiration of such period of ten business days.
Shares validly tendered to the Depositary pursuant to the Offer and
not withdrawn in accordance with the procedures set forth in the Offer
Documents will be held by Cinergy until the Expiration Date (or returned in
the event the Offer is terminated). Subject to the terms and conditions of
the Offer, as promptly as practicable after the Expiration Date, Cinergy
will accept for payment (and thereby purchase) and pay for Shares validly
tendered and not withdrawn. Cinergy will pay for Shares that it has
purchased pursuant to the Offer by depositing the applicable Purchase Price
with the Depositary, which will act as agent for the tendering Preferred
Stockholders for the purpose of receiving payment from Cinergy and
transmitting payment to tendering Preferred Stockholders. Cinergy will pay
all stock transfer taxes, if any, payable on account of its acquisition of
Shares pursuant to the Offer, except in certain circumstances where special
payment or delivery procedures are utilized in conformance with the
applicable Letters of Transmittal and Proxy.
With respect to Shares validly tendered and accepted for payment by
Cinergy, each tendering Preferred Stockholder will be entitled to receive
as consideration from Cinergy only the applicable Purchase Price (which
Cinergy anticipates will reflect a premium over the current market price at
the commencement of the Offer). Any such holder will not be entitled to
receive with respect to such tendered Shares additional consideration in
the form of a Cash Payment. As stated above in Item 1.C, the latter
payment is payable by CG&E solely in respect of Shares voted by Preferred
Stockholders at the Special Meeting in favor of the Proposed Amendment,
provided that (a) such Shares have not been tendered pursuant to the Offer
and (b) the Proposed Amendment is adopted at the Special Meeting.
Preferred Stockholders who wish to tender their Shares pursuant to the
Offer are not required to vote in favor of the Proposed Amendment; however,
the Offer is conditioned upon the Proposed Amendment being adopted at the
Special Meeting.
As noted immediately above, subject to the terms and conditions of the
Offer, Shares validly tendered and not withdrawn will be accepted for
payment and paid for by Cinergy as promptly as practicable after the
Expiration Date. If the Proposed Amendment is adopted at the Special
Meeting, promptly after consummation of the Offer Cinergy will make a
capital contribution to CG&E of all Shares tendered to and acquired by
Cinergy pursuant to the Offer, and CG&E will thereupon retire and cancel
such Shares.
If the Proposed Amendment is not adopted at the Special Meeting,
Cinergy may elect, but is not obligated, to waive such condition, subject
to applicable law./5/ In that case, as promptly as practicable after
Cinergy's waiver thereof and purchase of any Shares validly tendered
pursuant to the Offer, CG&E anticipates that it would call another special
meeting of its common and preferred stockholders and solicit proxies
therefrom for the same purpose as in the instant proceeding i.e., to
secure the requisite two-thirds affirmative vote of stockholders to amend
the Articles to eliminate the 20% Provision. At that meeting, Cinergy
would vote any Shares acquired by it pursuant to the Offer or otherwise/6/
(as well as all of its shares of Common Stock) in favor of the proposed
Articles amendment to eliminate the 20% Provision. If the proposed
amendment is adopted at that meeting, and in any event within one year from
the Expiration Date (including any potential extension thereto pursuant to
the Offer), Cinergy will promptly after such meeting or at the expiration
of such one-year period, as applicable, make a capital contribution to CG&E
of all Shares held by Cinergy, and CG&E will thereupon retire and cancel
such Shares.
To finance its purchase of any Shares tendered, accepted for payment
and paid for pursuant to the Offer, Cinergy intends to use its general
funds and/or funds borrowed pursuant to an existing credit agreement with a
group of banks (see Rel. No. 35-26488, March 12, 1996).
Smith Barney Inc. and Morgan Stanley & Co. Incorporated will act as
dealer managers for Cinergy in connection with the Offer. Cinergy has
agreed to pay the dealer managers a combined fee of $0.50 per Share for any
Shares tendered, accepted for payment and paid for pursuant to the Offer
and to reimburse the dealer managers for their reasonable out-of-pocket
expenses, including attorneys' fees. In addition, Cinergy has agreed to
pay soliciting brokers and dealers a separate fee of $1.50 per Share for
any Shares tendered, accepted for payment and paid for pursuant to the
Offer (except that (a) for transactions with beneficial owners equal to or
exceeding 5,000 Shares, Cinergy will pay a solicitation fee of $1.25 per
Share, and (b) soliciting brokers and dealers will not be entitled to any
solicitation fee with respect to tendered Shares accepted for payment as to
which they are the beneficial owners). As set forth in Item 2, Cinergy
proposes to pay the Depositary a fee estimated at approximately $22,000.
2. Benefits of Offer; Utilization of Cinergy rather than CG&E as
Offeror
The proposed acquisition by Cinergy of Shares pursuant to the Offer
will benefit Cinergy's utility system customers, shareholders and Preferred
Stockholders. The Offer allows Preferred Stockholders who may not favor
the elimination of the 20% Provision an option to exit the Preferred Stock
at a premium to the market price and without the usual transaction costs
associated with a sale. System utility customers and Cinergy shareholders
will benefit from CG&E lowering its cost of capital through the anticipated
reduction in the aggregate amount payable of Preferred Stock dividends and,
to the extent Preferred Stock is replaced with debt, realizing benefits
from the tax deductibility of interest since preferred stock dividends are
not deductible for tax purposes. Moreover, as discussed above in Item
1.C.2, elimination of the 20% Provision will (among other benefits) permit
CG&E to redeem and replace a portion of its high-coupon debt with lower
cost short-term debt, resulting in additional cost savings.
More specifically, assuming only a 50% overall success rate for the
Offer, the estimated cash savings to CG&E thereafter amount to between $3.4
million each year (based on dollar-for-dollar replacement of Preferred
Stock with short-term debt at prevailing rates on the date hereof) and $7
million each year (based on purchased Shares being refinanced entirely by
cash and short-term investments on hand), after taxes and excluding
expenses incurred in connection with the Offer and the Proxy Solicitation.
On a cumulative net present value savings basis, assuming (x) a 50% overall
success rate for the Offer (and that 30% of all Preferred Stockholders do
not tender their Shares pursuant to the Offer but do vote in favor of the
Proposed Amendment at the Special Meeting), (y) refinancing of Shares
acquired and paid for pursuant to the Offer with short-term debt at
prevailing rates at the date hereof (and assuming such rates do not change
throughout the period), and (z) a discount rate equal to CG&E's after-tax
weighted average cost of capital, the proposed transactions are anticipated
to yield total after-tax, present value cash savings of about $18 million
over approximately the next seven and one-half years/7/, net of cash
expenditures incurred in the Offer and Proxy Solicitation (i.e., Cash
Payments, the applicable Purchase Prices paid for validly tendered and
accepted Shares, and the other fees and expenses listed in Item 2). Of
course, a success rate for the Offer higher than the 50% rate assumed above
has the potential to generate even further cash savings.
As noted above (see Item 1.B), CG&E conducted an unsuccessful proxy
solicitation in the fall of 1995 the purpose of which was to obtain the
requisite affirmative vote of shareholders to suspend or eliminate from the
Articles the 20% Provision. Given the significant benefits that will
accrue from elimination of the 20% Provision, Applicants remain committed
to using their best efforts to secure that result. A principal aim of the
proposed transactions is to accomplish that objective in a cost-effective
manner. However, as with the 1995 proxy solicitation, there can be no
assurance of success.
In that regard, as stated above in Item 1.D.1, in the event the
Proposed Amendment is not adopted at the Special Meeting, Cinergy may
elect, subject to applicable law, to waive the Offer condition that the
Proposed Amendment be adopted at the Special Meeting. In that case, as
promptly as practicable after Cinergy's waiver thereof and purchase of
Shares validly tendered pursuant to the Offer, CG&E anticipates that it
would call another special meeting of its common and preferred stockholders
and solicit proxies for the same purpose as herein to secure the
requisite two-thirds affirmative vote of both classes of stockholders to
amend the Articles to eliminate the 20% Provision. At that meeting,
Cinergy would vote any Shares previously acquired by it pursuant to the
Offer or otherwise (together with shares held by it of Common Stock) in
favor of such proposed amendment to the Articles, thereby maximizing its
prospects for adoption in that event. By contrast, if CG&E, rather than
Cinergy, had acquired Shares pursuant to the Offer, upon acquisition
thereof by CG&E any such Shares would be deemed treasury shares under Ohio
law and, as such, CG&E would be precluded from voting those Shares under
any circumstances.
Item 2. Fees, Commissions and Expenses.
Other than the Cash Payments and the applicable Purchase Prices
described in Item 1, the fees, commissions and expenses (each, a "fee") to
be incurred, directly or indirectly, by Cinergy and CG&E or any associate
company thereof in connection with the proposed transactions are estimated
as follows:
U-1 filing fee. . . . . . . . . . . $2,000
Cinergy Services, Inc. fees. . . . . .$10,000
Outside counsel fees . . . . . . . . .$65,000
Information agent fees . . . . . . . .$35,000
Dealer manager fees. . . . . . . . . $770,000
Depositary fees. . . . . . . . . . . .$22,000
Broker/dealer fees . . . . . . . . . $750,000
Printing, mailing, stock transfer
taxes and miscellaneous fees . . . . .$75,000
TOTAL. . . . . . . . . . . . . . . $1,729,000
Item 3. Applicable Statutory Provisions.
Section 12(e) of the Act and Rules 62 and 65 thereunder are applicable
to the Proxy Solicitation. Section 12(e) and Rule 65 are and Section
6(a)(2) may be deemed applicable to Cash Payments. Section 6(a)(2) is
applicable to the Proposed Amendment. Sections 9(a) and 10 and Rule 51 are
applicable to the acquisition by Cinergy of Shares pursuant to the Offer;
Cinergy hereby represents that the conditions of Rule 51 will be satisfied
in respect of the acquisition by Cinergy of Shares pursuant to the Offer.
The contemplated capital contribution by Cinergy to CG&E of Shares acquired
by Cinergy pursuant to the Offer is exempt from Section 12(b) and Rule
45(a) pursuant to Rule 45(b)(4). CG&E anticipates that any issuances or
sales by it of unsecured debt following adoption of the Proposed Amendment
will be exempt from Section 9(a) by virtue of Rule 52. Rule 54 is also
applicable to the proposed transactions. To the extent that the Commission
determines that any other provision of the Act or rule thereunder is
applicable to the proposed transactions, Applicants request an order or
orders thereunder.
Item 4. Regulatory Approval.
Other than the jurisdiction of the Commission under the Act and the
Exchange Act, no state or federal regulatory agency has jurisdiction over
the proposed transactions.
Applicants will comply fully with all requirements of the Exchange Act
and the rules and regulations thereunder applicable to the Proxy
Solicitation and the Offer, and acknowledge that any Commission
authorization granted under the Act is conditioned upon such compliance.
Item 5. Procedure.
As stated in Item 1, the Special Meeting is scheduled to take place on
or about Wednesday, September 18, 1996. CG&E, which was unsuccessful in a
similar proxy solicitation authorized by the Commission in the fall of
1995, needs to secure a super-majority affirmative vote of its Preferred
Stockholders to secure passage of the Proposed Amendment.
In order to afford CG&E sufficient time in advance of the Special
Meeting to solicit proxies and to maximize the prospect for adoption of the
Proposed Amendment at the Special Meeting, Applicants request that the
Commission issue and publish not later than Friday, August 16, 1996 the
requisite notice under Rule 23 with respect to the filing of this
Application-Declaration, together with an order under Section 12(e) and
Rule 62 permitting CG&E to solicit proxies pursuant to the Proxy
Solicitation. As explained in Item 1, concurrently with the commencement
of the Proxy Solicitation, Cinergy intends to commence the Offer using a
combined issuer tender offer statement/proxy statement under the Exchange
Act.
Applicants further request that the Proxy Solicitation Order specify a
date not later than Monday, September 9, 1996 as the date after which the
Commission may issue an order granting and permitting to become effective
the other transactions for which authorization is sought herein, namely,
the Proposed Amendment and Cash Payments together with Cinergy's
acquisition of Shares pursuant to the Offer. Applicants request that the
Commission issue this second order by not later than Friday, September 13,
1996 (i.e., three business days before the Special Meeting/Expiration
Date).
Applicants waive a recommended decision by a hearing officer or other
responsible officer of the Commission; consent that the Staff of the
Division of Investment Management may assist in the preparation of the
Commission's orders herein; and request that there be no waiting period
between the issuance of such orders and their effectiveness.
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
A-1 Amended Articles of Incorporation of CG&E effective
January 24, 1994 (filed as an exhibit to CG&E's 1993 Form 10-K in File No.
1-1232 and hereby incorporated by reference).
A-2 Regulations of CG&E as amended, adopted April 25, 1996
(filed as an exhibit to CG&E's Form 10-Q for the quarter ended March 31,
1996, in File No. 1-1232 and hereby incorporated by reference).
B-1 Preliminary Offer to Purchase and Proxy Statement
(filed in Commission File No. 1-1232 on July 11, 1996 and hereby
incorporated by reference)
B-2 Draft Notice of Special Meeting (attached as part of
Exhibit B-1)
B-3 Draft Form of Proxy (see Exhibit B-4)
B-4 Draft Form of Letter of Transmittal and Proxy (attached
as part of Exhibit B-1)
C Not applicable
D Not applicable
E Not applicable
F Preliminary opinion of counsel (to be filed by
amendment)
G Form of notice and order permitting proxy solicitation
(previously filed)
(b) Financial Statements:
FS-1 Cinergy Consolidated Financial Statements, dated March
31, 1996 (to be filed by amendment)
FS-2 Cinergy Financial Statements, dated March 31, 1996 (to
be filed by amendment).
FS-3 CG&E Consolidated Financial Statements, dated March 31,
1996 (to be filed by amendment).
FS-4 Cinergy Consolidated Financial Data Schedule (to be
filed by amendment as part of electronic submission only).
FS-5 Cinergy Financial Data Schedule (to be filed by
amendment as part of electronic submission only).
FS-6 CG&E Consolidated Financial Data Schedule (to be filed
by amendment as part of electronic submission only).
Item 7. Information as to Environmental Effects.
(a) The Commission's action in this matter will not constitute major
federal action significantly affecting the quality of the human
environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transactions.
PAGE
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, each of the undersigned
companies has duly caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 16, 1996
Cinergy Corp.
By: /s/ William L. Sheafer
Treasurer
The Cincinnati Gas & Electric Company
By: /s/ William L. Sheafer
Treasurer
<PAGE>
Endnotes
/1/ Approximately 58% of CG&E's preferred stockholders voted in favor of
the proposal to suspend for a term of years the Articles restriction on
unsecured indebtedness; approximately 51% voted in favor of the proposal to
eliminate the restriction. Prior to the proxy solicitation, Cinergy had
informed CG&E that it would vote its shares of CG&E common stock in favor
of both proposals.
/2/ The four series of Preferred Stock consist of a 4% series, of which
270,000 shares are outstanding ("4% Series"); a 4-3/4% series, of which
130,000 shares are outstanding ("4-3/4% Series"); a 7-3/8% series, of which
800,000 shares are outstanding ("7-3/8% Series"); and a 7-7/8% series, of
which 800,000 shares are outstanding ("7-7/8% Series").
/3/ The Commission has authorized utility subsidiaries of registered
holding companies to solicit their shareholders for similar charter
amendments with respect to unsecured debt limitations. See, e.g.,
Blackstone Valley Electric Company, Rel. No. 35-26320 (June 28, 1995);
Alabama Power Company, Rel. No. 35-26118 (Sept. 7, 1994).
/4/ Preferred Stockholders will not be under any obligation to tender
Shares pursuant to the Offer; the Offer will not constitute a notice of
redemption of any Series pursuant to the Articles. Nor will the Offer
operate to waive any option CG&E has to redeem Shares. The 7-3/8% Series
is subject to mandatory redemption in an amount sufficient to retire on
each August 1, beginning in 1998, and in each year thereafter, 40,000
Shares, at a price of $100 per Share plus accrued dividends, and CG&E has
the noncumulative option to redeem up to 40,000 additional Shares in each
such year. In addition, the 7-3/8% Series is redeemable, upon call, after
August 1, 2002 at a price of $100 per Share plus accrued dividends. The
entire 7-7/8% Series is subject to mandatory redemption on January 1, 2004
at a price of $100 per Share plus accrued dividends. The Shares of each
Series have no preemptive or conversion rights.
/5/ In this regard, as noted above, if Cinergy waives a material condition
of the Offer (such as the condition that the Proposed Amendment be adopted
at the Special Meeting), Cinergy will extend the Expiration Date to the
extent required by the applicable provisions of Rule 13e-4 under the
Exchange Act. Those provisions require that the minimum period during
which an issuer tender offer must remain open following material changes in
the terms of the offer or information concerning the offer (other than a
change in price or change in percentage of securities sought) will depend
on the facts and circumstances, including the relative materiality of such
terms or information.
/6/ Following the Expiration Date and the consummation of the purchase of
Shares pursuant to the Offer, Cinergy may determine to purchase additional
Shares on the open market, in privately negotiated transactions, through
one or more tender offers or otherwise. Cinergy will not undertake any
such transactions without receipt of any required Commission authorizations
under the Act in one or more separate proceedings. Likewise, in the event
such a further special meeting is necessary, CG&E would not undertake any
associated proxy solicitation and proposed Articles amendment prior to
receipt of any required Commission authorizations under the Act in a
separate proceeding.
/7/ The termination date of this approximate seven and one-half year period
corresponds with the mandatory redemption date of the 7-7/8% Series, i.e.,
January 1, 2004.
