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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. 21)
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. 21 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 and August
31, 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 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby supplemented and amended by adding the following:
Exhibit (a)(22) - Form of Letter to Newspaper Editors.
Exhibit (a)(23) - Letter from Oliver G. Richard III to Shareholders
of the Company, dated as of September 2, 1999.
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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 2, 1999
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Exhibit List
Exhibit (a)(22) - Form of Letter to Newspaper Editors.
Exhibit (a)(23) - Letter from Oliver G. Richard III to Shareholders of the
Company, dated as of September 2, 1999.
Final 9/2/99
September __, 1999
Dear [Newspaper Editor]:
Your readers may have noticed advertisements recently in which NiSource
Inc., an Indiana-based energy company, talked about its commitment to corporate
citizenship and its "sponsorship" (along with two dozen other companies) of the
Rocky Gap Music Festival. These ads also referred vaguely to NiSource's "efforts
to bring Columbia Energy Group into the NiSource family." We at Columbia, who
have been partners in your community for generations, believe your readers
deserve to hear the full story about NiSource.
The ads failed to mention that, since early June, NiSource has been
trying in a hostile takeover attempt to acquire the parent of [Columbia
subsidiaries] which operate in your area. NiSource is spending millions of
dollars on this effort--including initiating three separate lawsuits, launching
an unsolicited tender offer, and pursuing an aggressive public relations
campaign notable for its hype and misstatements. We believe this attempt at a
1980s-style leveraged buyout--by a company with no operations or roots in your
area--could be very harmful to the many communities we serve in the Mid-Atlantic
region.
Columbia's board of directors has determined repeatedly that NiSource's
various unsolicited offers have been inadequate and not in the best interest of
Columbia or its shareholders. Columbia also has expressed serious concerns about
NiSource's operating record -- particularly with respect to the quality of its
customer service, the rates it charges customers, and its position on consumer
choice.
In Indiana, NiSource's principal subsidiary has - by far - the highest
residential rates of the state's 42 electric utilities, according to a recent
survey issued by the Indiana Utility Regulatory Commission. Likewise, according
to a survey published by J.D. Power and Associates and Navigant Consulting, that
same NiSource operation, Northern Indiana Public Service Company (NIPSCO) ranked
"below average" for customer service among electric utility companies in the
Midwest.
<PAGE>
Other companies across the nation, including Columbia, have embraced
market competition and freedom of choice for their customers, which could lead
to lower energy prices. Columbia has been taking a dynamic role in extending
choice to customers across its service area. By contrast, NiSource is refusing
to face the future and seems to be desperately clinging to its monopoly
mentality.
Quite simply, for all of these reasons, Columbia has no interest in
becoming a part of "the NiSource family." And we don't think NiSource is the
kind of company your community should want to keep. After all, it takes more
than a few newspaper ads and festival co-sponsorships to truly be an outstanding
corporate citizen.
We have a long, active and valued relationship with our customers and
the local communities where we do business. Our employees are your neighbors and
your readers. Together, in all parts of Columbia Energy Group, we work hard to
be strong partners everywhere we live and serve, across our operating region.
Sincerely,
R.A. Rankin, Jr.
Vice President
Corporate Communications
September 2, 1999
Dear Shareholder:
As you may know, CEG Acquisition Corp., a wholly owned subsidiary of
Indiana-based NiSource Inc. that has no affiliation with our company, has
extended the deadline for its hostile tender offer for all of the outstanding
shares of common stock of Columbia Energy Group until October 15, 1999. PLEASE
REMEMBER THAT CEG ACQUISITION CORP. HAS NO RELATIONSHIP WITH COLUMBIA ENERGY
GROUP. NISOURCE CREATED CEG ACQUISITION CORP. SOLELY TO TRY TO ACHIEVE A HOSTILE
TAKEOVER OF YOUR COMPANY.
Your Board of Directors believes strongly that this $68 per share cash
tender offer is inadequate and not in the best interests of Columbia's
shareholders. Due to the hostile nature of the offer, it is highly unlikely that
shareholders who tender their shares would receive any payment from NiSource in
less than 18 months, if ever.
Accordingly, we recommend that you reject NiSource's ongoing hostile
takeover attempt and not tender your shares. If you already have tendered your
shares to NiSource, we recommend that you revoke the tender, which you can do at
any time prior to the expiration of the offer. It is easy to withdraw tendered
shares. To find out how to do it, please call our information agent for the
tender offer, MacKenzie Partners, at 1-800-322-2885 or 212-929-5500 (call
collect).
Quite simply, NiSource's ill-conceived decision to continue its costly
and disruptive tender offer and related hostilities?which include an aggressive
public relations campaign and three separate lawsuits against Columbia and
certain of its officers and directors?hasn't changed our belief that NiSource's
various merger proposals have been for the wrong price, at the wrong time and
with the wrong company.
THE WRONG PRICE
Your Board's determination that the NiSource tender offer is inadequate
from a financial point of view is based, in part, on a detailed financial
analysis and opinions from our financial advisors, Morgan Stanley Dean Witter
and Salomon Smith Barney. This view has been affirmed in recent weeks by many of
the equity analysts covering our industry.
Please note, for example, the following comments from leading analysts:
"PERHAPS THE BIGGEST STUMBLING BLOCK IS, IN OUR VIEW, THE INADEQUACY OF
THE $68 BID BASED ON [COLUMBIA'S] RISING EARNINGS POWER AND
DISCRETIONARY CASH FLOW. BASED ON THE LONG-TERM EARNINGS POWER AND THE
STRATEGIC VALUE OF [COLUMBIA'S] ASSETS, WE BELIEVE A MORE APPROPRIATE
MERGER VALUE APPROXIMATES $80/SHARE."
WILLIAM HYLER, CIBC WORLD MARKETS CORP.
RESEARCH NOTE, AUGUST 10, 1999
"WE WOULD ADDRESS [COLUMBIA'S] PROGRESS FUNDAMENTALLY AND THROUGH ITS
ACTIVE SHARE REPURCHASE PROGRAM AS MAKING THE [NISOURCE] OFFER EVEN
MORE INADEQUATE THAN IT ORIGINALLY APPEARED."
CURT LAUNER, DLJ SECURITIES
RESEARCH NOTE, AUGUST 9, 1999
THE WRONG TIME
We are committed to building shareholder value in both the near and
long term, and are hard at work in implementing the strategic initiatives that
will help us achieve this objective. We have expanded and enhanced Columbia's
unique and valuable network of assets and businesses, built a talented and
effective management team, and developed a sound, forward-looking strategy for
both the regulated and non-regulated sides of our business. As a result of these
efforts, Columbia's total rate of return has outperformed our peer group since
1995. Likewise, Columbia recently announced its fourth consecutive quarter of
year-over-year earnings improvement. And we believe the best is yet to come.
<PAGE>
This view, too, has been echoed by leading equity analysts:
COLUMBIA "DEMONSTRATED A CONCRETE AND, WE BELIEVE, DOABLE STRATEGY TO
GROW ITS NON-REGULATED BUSINESSES INTO 30% OF OPERATING EARNINGS BY
YEAR-END 2001 AND EARN HIGH RETURNS ON INVESTED CAPITAL IN BOTH ITS
REGULATED AND NON-REGULATED OPERATIONS."
DAVID FLEISCHER, DAVID MACCARRONE,
ERIC W. MANDELBLATT, GOLDMAN SACHS
RESEARCH NOTE, JUNE 28, 1999
"IN SHORT, ONE CANNOT JUST SELL AWAY THIS COMPANY TO THE FIRST BIDDER
(AND DISREGARD MANAGEMENT'S OVERALL ACCOMPLISHMENTS) JUST BECAUSE IT
HAS BEEN EXPERIENCING SOME CHALLENGES IN DEVELOPING A NEW BUSINESS
LINE."
JAMES A. YANNELLO, PAINEWEBBER
RESEARCH NOTE, JUNE 11, 1999
THE WRONG COMPANY
In making its determination to reject NiSource's various proposals,
Columbia also questioned whether NiSource's proposed financing will be approved
by regulators, the potential impact of a merger on employees and customers, and
the strategic merits of a combination of our two vastly different companies.
We believe regulators will have serious concerns about NiSource's need
to borrow more than $5.7 billion to complete the acquisition and then try to
reduce that massive debt by attempting the largest equity offering ever in the
energy utility industry.
We also have questioned NiSource's record on customer service, rate
increases, and consumer choice. A recent survey published by J.D. Power &
Associates and Navigant Consulting reported that NiSource's principal subsidiary
in Indiana was ranked "below average" for customer satisfaction among Midwest
electric utilities. Likewise, the latest annual survey by the Indiana Utility
Regulatory Commission found that NiSource's subsidiary has the highest
residential electric rates of all 42 electric utilities in the state.
Even more importantly, NiSource has done little to demonstrate that it
is ready to face a more competitive future by providing choice to its customers.
Columbia, by contrast, has been a leader in this area.
<PAGE>
Our views about NiSource have been echoed by analysts as well:
"AFTER ATTENDING AN ANALYST MEETING WITH NISOURCE'S MANAGEMENT AND
LISTENING TO ITS OVERALL POSITION TOWARDS COLUMBIA, WE QUESTION THE
VALIDITY OF MANY OF [NISOURCE'S] ARGUMENTS."
JAMES A. YANNELLO, PAINEWEBBER
RESEARCH NOTE, JUNE 11, 1999
"WITH THE NEW DISCLOSURES AND BUSINESS PLANS REVIEWED IN THE COMPANY'S
NON-REGULATED SEGMENTS, IT IS CLEAR WHY COLUMBIA'S MANAGEMENT IS SO
POSITIVE ABOUT THE COMPANY'S PROSPECTS AND VALUE CREATION OPPORTUNITIES
AND UNWILLING TO SELL TO NISOURCE, WHICH HAS A $3.4 BILLION MARKET
CAPITALIZATION COMPARED TO COLUMBIA'S $5.3 BILLION MARKET
CAPITALIZATION."
DAVID FLEISCHER, DAVID MACCARRONE,
ERIC W. MANDELBLATT, GOLDMAN SACHS
RESEARCH NOTE, JUNE 28, 1999
"THE COLUMBIA REACTION WAS ENTIRELY EXPECTED. I THINK MOST OF WALL
STREET WOULD SHARE MY OBSERVATION THAT WE COULD SEE HOW MUCH GOOD THIS
WOULD DO FOR NISOURCE, BUT WE DON'T SEE MUCH GOOD FOR THE COLUMBIA
HOLDERS."
JOHN OLSON, SANDERS MORRIS MUNDY
THE WASHINGTON TIMES, JULY 7, 1999
A COSTLY AND DISRUPTIVE EFFORT
For all of these reasons, we believe NiSource should end this needless
waste of corporate resources at a time when there are so many promising
opportunities in the rapidly changing energy market. You can help us send this
message to NiSource by refusing to participate in its costly and disruptive
tender offer.
As we said earlier, please keep in mind that IT IS HIGHLY UNLIKELY THAT
SHAREHOLDERS WHO TENDER THEIR SHARES WOULD RECEIVE ANY PAYMENT FROM NISOURCE IN
LESS THAN 18 MONTHS, IF EVER. This is because of the significant conditions that
NiSource has imposed on its offer and the numerous state and federal regulatory
approvals that must be obtained before the tender offer could be consummated.
ONCE AGAIN, WE URGE YOU NOT TO TENDER YOUR SHARES TO NISOURCE. If you have
already tendered your shares, you can withdraw your tender at any time before
they are accepted for payment. If you have any questions about the tender
process, including how to withdraw a tender, please contact our information
agent, MacKenzie Partners, at 1-800-322-2885 or 212-929-5500 (call collect).
Your Board of Directors and management will continue to act in the best
interests of the company and all its shareholders.
On Behalf of the Board of Directors
Sincerely,
OLIVER G. RICHARD III
Chairman, President and
Chief Executive Officer
<PAGE>
If you have any questions please contact:
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
