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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 38)
COLUMBIA ENERGY GROUP
(NAME OF SUBJECT COMPANY)
COLUMBIA ENERGY GROUP
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.01
(TITLE OF CLASS OF SECURITIES)
197648108
(CUSIP NUMBER OF CLASS OF SECURITIES)
MICHAEL W. O'DONNELL
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
COLUMBIA ENERGY GROUP
13880 DULLES CORNER LANE
HERNDON, VIRGINIA 20171
(703) 561-6000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
NEIL T. ANDERSON, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
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This Amendment No. 38 amends and supplements the Solicitation/
Recommendation Statement on Schedule 14D-9 filed with the Securities and
Exchange Commission on July 6, 1999, and as subsequently amended July 6, 1999,
July 9, 1999, July 12, 1999, July 15, 1999, July 16, 1999, July 20, 1999, July
22, 1999, July 30, 1999, August 3, 1999, August 4, 1999, August 5, 1999, August
6, 1999, August 9, 1999, August 11, 1999, August 12, 1999, August 13, 1999,
August 16, 1999, August 17, 1999, August 19, 1999, August 31, 1999, September 2,
1999, September 3, 1999, September 7, 1999, September 9, 1999, September 10,
1999, September 13, 1999, September 14, 1999, September 15, 1999, September 16,
1999, September 17, 1999, September 20, 1999, September 21, 1999, September 22,
1999 September 23, 1999, September 24, 1999 and September 27, 1999 (as so
amended, the "Schedule 14D-9"), by Columbia Energy Group, a Delaware corporation
(the "Company"), relating to the tender offer by NiSource Inc., an Indiana
corporation, to purchase for cash through its wholly-owned subsidiary, CEG
Acquisition Corp., a Delaware corporation, all of the outstanding common shares,
par value $0.01 per share, of the Company (the "Offer"). Capitalized terms used
but not defined herein have the meaning ascribed to them in the Schedule 14D-9.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
Item 6 is hereby supplemented and amended by adding the following:
On September 27, 1999, pursuant to its previously announced repurchase
program, the Company purchased 31,000 Shares on the open market at a weighted
average price per share of $55.6298.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby supplemented and amended by adding the following:
Exhibit (a)(27) - Employee Questions and Answers Sheet.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
COLUMBIA ENERGY GROUP
By: /s/ Michael W. O'Donnell
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Name: Michael W. O'Donnell
Title: Senior Vice President and Chief Financial
Officer
Dated: September 28, 1999
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Exhibit List
Exhibit (a)(27) - Employee Questions and Answers Sheet.
September 28, 1999
FOR COLUMBIA EMPLOYEES
The following is some additional information we hope will answer questions you
may have about NiSource's unsolicited tender offer for Columbia Energy Group.
Here are the areas covered:
o Columbia's Tactics
o Other Newspaper Ads
o Choice Comparisons
o Recent Strategic Actions
o Litigation Status
o Tender Offer
o NiSource Financing
o Next Steps
o COLUMBIA'S TACTICS
WHY DID COLUMBIA TAKE OUT ADVERTISEMENTS IN NEWSPAPERS IN NORTHERN INDIANA
AND ADJACENT AREAS?
We believe it is important for the customers, shareholders and employees of
NiSource and its operating subsidiaries to understand that the decision by
NiSource management to continue its costly and disruptive hostile takeover
attempt could have serious repercussions in Indiana.
WHAT PROMPTED COLUMBIA TO RUN THE ADS AT THIS TIME?
In recent weeks, NiSource has run advertising in Columbia's operating
communities--where NiSource has no roots--in which NiSource talked of its
"sponsorship" (along with many other companies) of local festivals, and
referred vaguely to its efforts to "bring Columbia into the NiSource
family." Columbia and its subsidiaries have been partners in our operating
communities for generations, and we believe it is necessary to set the
record straight on why Columbia has no interest in becoming a part of "the
NiSource family."
ARE YOU PLANNING TO RUN SIMILAR ADS IN INDIANA IN THE FUTURE?
We will consider running additional ads in NiSource's operating areas if we
believe that can help its shareholders, customers and employees, as well as
regulators and other important constituencies, to understand the
consequences of NiSource's actions, with the intent of ending the
disruptive and costly activities pursued.
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o OTHER NEWSPAPER ADS
WHY DID COLUMBIA RECENTLY RUN AN AD IN THE COLUMBUS DISPATCH ABOUT THE
NISOURCE SITUATION?
We felt it was important for our friends and neighbors in the Columbus
area--where Columbia Gas of Ohio has hundreds of employees--to hear the
full story about NiSource, which had been trying to generate attention for
its co-sponsorship (along with many other companies) of the local
Oktoberfest. NiSource had run ads in the Columbus Dispatch touting its
participation.
ARE YOU PLANNING TO RUN THE COLUMBUS AD IN OTHER PARTS OF COLUMBIA'S
OPERATING REGION?
We will consider running a similar advertisement in our operating areas if
NiSource continues to sponsor local festivals and take out newspaper ads in
places where it has no roots or major business operations.
IS COLUMBIA PLANNING TO RUN ANY OTHER KINDS OF ADS IN THE NEAR FUTURE?
Yes. A series of newspaper ads highlighting Columbia's ongoing involvement
with Habitat for Humanity will be running in many parts of our operating
region in the coming weeks.
o CHOICE COMPARISONS
NISOURCE CLAIMS IT HAS PIONEERED "CHOICE" IN INDIANA. HOW DOES ITS PROGRAM
COMPARE WITH COLUMBIA'S?
We believe NiSource is years behind Columbia in adopting and promoting a
"choice" program for its customers. Leading experts have recently cited
Columbia as a nationwide leader in embracing market competition and freedom
of choice for our customers, which could lead to lower energy prices. We
have more than 552,000* customers enrolled in our choice program across the
system, which is "unbundled" to the extent currently allowed by law or
regulatory authorities. NiSource's NIPSCO subsidiary reports having
approximately 15,000* customers enrolled in Indiana. In its Bay State
subsidiary in Massachusetts, which began a choice program prior to its
acquisition by NiSource in 1999, the program reports about 21,000*
participants, down significantly from 1998 levels.
*June 1999 data
We believe our choice programs have been so successful because our local
distribution companies have worked hard to make them both consumer and
marketer friendly, while providing real value to the consumer. In Ohio, for
example, our extensive customer information program has resulted in 92
percent awareness of choice among our customers. The customer savings are
high because the Columbia choice programs give participating
marketers--more than 40 across the Columbia system--great freedom in
purchasing and transportation of their natural gas supplies, allowing them
to create attractive savings opportunities for customers.
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Choice is being extended to electric customers in three of the states in
which Columbia operates distribution services following or in concert with
the success established in the gas programs.
o RECENT STRATEGIC ACTIONS
WAS THE DECISION TO SELL THE WHOLESALE TRADING BUSINESS RELATED TO THE
NISOURCE SITUATION?
No. The decision to sell CES's wholesale gas and power trading business
came following a strategic review of its overall energy marketing
businesses begun in February 1999. Led by the unit's new CEO, the review
led to the conclusion that CES would do better to concentrate on becoming a
significant player in the retail end of the business in the Eastern United
States, where Columbia's existing geographic footprint gives us an
advantage.
HAS COLUMBIA CHANGED ITS GROWTH STRATEGY?
No. We are continuing to pursue our strategic financial objectives for the
end of fiscal year 2001: To achieve 30 percent of our operating income from
non-regulated businesses, to average 10 to 12 percent annual earnings
growth, and to achieve shareholder returns in the top quarter of our peer
group. As you know, we are aggressively pursuing actions to achieve these
objectives.
o LITIGATION STATUS
WHAT IS THE STATUS OF THE LAWSUITS THAT NISOURCE PREVIOUSLY FILED AGAINST
COLUMBIA?
As part of its hostile takeover attempt, NiSource filed three separate
lawsuits against Columbia and its directors. One of the suits was dismissed
by the Chancery Court of the State of Delaware on Sept. 22. That lawsuit,
filed by a NiSource subsidiary, alleged that Columbia was required to
reconvene its 1999 annual meeting of stockholders in order to elect a
thirteenth director to its Board. The Delaware court previously denied
NiSource's motion for an accelerated hearing in its suit to block the stock
repurchase program originally authorized by Columbia's Board in February
1999. A suit filed by NiSource in federal court is in the "discovery"
process; no hearing date has been set.
WHAT IS THE SIGNIFICANCE OF THE LAWSUIT FILED BY NEW YORK STATE ATTORNEY
GENERAL ELIOT SPITZER AGAINST NISOURCE AND OTHER COMPANIES?
On Sept. 15, New York Attorney General Eliot Spitzer announced that New
York State would sue NiSource and the owners of 16 other coal-fired power
plants in the U.S. Midwest because of smokestack emissions linked to acid
rain and other health hazards.
Spitzer alleged that NiSource and the other companies are in violation of
the federal Clean Air Act as amended in 1990, which requires that when
power plants make major structural changes, those power plants must comply
with the same environmental standards as new power plants. He is seeking
millions of dollars in damages from NiSource and other companies. o TENDER
OFFER
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WHAT IS THE CURRENT STATUS OF NISOURCE'S TENDER OFFER?
NiSource's tender offer is scheduled to expire on Oct. 15. As with the
previous Aug. 6 deadline, the outcome of the tender offer has little
significance because--no matter how many shares are tendered--NiSource must
still go through a lengthy regulatory approval process before it could
actually buy the tendered shares. We believe NiSource's main goal in using
the tender offer process is to try to pressure Columbia's Board and
management.
NiSource likely decided to extend the tender offer because it hopes to
increase the percentage of shares tendered. But it is quite possible that
the number of tendered shares will actually decrease by Oct. 15, as
shareholders who are frustrated with NiSource's hostile tactics, declining
stock price and lack of success withdraw their tenders.
HAS NISOURCE MADE ANY PROGRESS IN LINING UP REGULATORY OR POLITICAL SUPPORT
FOR ITS HOSTILE TAKEOVER ATTEMPT?
We are not aware of any important developments in this regard. In fact, a
number of public officials in Ohio have openly expressed their concerns
about NiSource's unsolicited takeover attempt.
WHAT WOULD HAPPEN IF NISOURCE OBTAINS MORE THAN 60 PERCENT OF THE TENDERS
THIS TIME? IS IT TRUE THAT IT CAN TAKE CONTROL OF THE COMPANY SIMPLY BY
OBTAINING TENDERS FOR AT LEAST 85 PERCENT OF COLUMBIA'S SHARES?
A tender of shares is not the same as a sale. No matter how many shares are
tendered, NiSource must go through a lengthy regulatory approval process
before it can actually buy those tendered shares. This process, which could
take 18 months or longer, prevents NiSource from taking control of Columbia
any time soon, if ever.
o NISOURCE FINANCING
NISOURCE HAS REPEATEDLY INSISTED THAT FINANCING FOR ITS PROPOSED
TRANSACTION IS NOT AN ISSUE. DO YOU AGREE?
No. Columbia has noted numerous "issues" in connection with NiSource's
ability to satisfy the conditions to its financing commitments.
We also note that the recent decline in NiSource's stock price makes its
overall financing plans more difficult to achieve. In fact, as NiSource's
stock price continues to decline, its ability to finance its proposed
transaction becomes ever more difficult. NiSource has said it intends to
try to pay down some of the billions of dollars of debt that it would incur
by issuing additional common stock. But that equity offering requires the
issuance of more and more shares as
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NiSource's stock price continues to decline. As more shares are issued it
becomes difficult--if not impossible--for the transaction to add to
NiSource's earnings per share.
Moreover, NiSource itself recently acknowledged in a SEC filing that there
is a risk that the credit rating for its debt could be downgraded if the
proposed transaction is ever consummated. NiSource previously had insisted
that the rating agencies were not concerned about its proposal.
ARE NISOURCE'S SHAREHOLDERS SUPPORTIVE OF ITS ACTIONS?
We can't speak for NiSource's shareholders. But, as we have said before, we
believe the decision by NiSource management to continue its expensive,
disruptive and unwanted takeover attempt is not in the best interest of
either company. Considering that NiSource's stock price has declined by
approximately 21.5 percent* since the start of its hostile takeover
attempt, we would not be surprised if NiSource's shareholders are actively
pressuring the company to move on to more productive activities. Meanwhile,
we at Columbia remain committed to fostering the growth and development of
our businesses to maximize value for our customers, employees and
shareholders.
*from June 4 to Sept. 27, 1999
o NEXT STEPS
WHAT HAPPENS NEXT? WHAT SHOULD I DO NOW?
As the Wall Street Journal predicted more than a month ago, this situation
appears to be caught in a prolonged stalemate. NiSource may try to break
that stalemate by again claiming victory when the tender offer results are
announced after the expiration of its offer on Oct. 15. As we have said
before, we do not believe the results of the tender offer are particularly
noteworthy.
If you want to help NiSource understand that the best way to break the
stalemate is to end its hostile takeover attempt, you should not tender
your shares. Previously tendered shares can be withdrawn at any time prior
to the expiration of the offer. To do so, contact our information agent for
the tender offer, MacKenzie Partners, at 800-322-2885 or 212-929-5500.
