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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
SCHEDULE 14D-1/A
(Amendment No. 4)
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------
COLUMBIA ENERGY GROUP
(Name of Subject Company)
CEG ACQUISITION CORP.
NISOURCE INC.
(Bidders)
COMMON STOCK, $.01 PER SHARE
(Title of Class of Securities)
197648108
(CUSIP Number of Class of Securities)
Stephen P. Adik
Senior Executive Vice President,
Chief Financial Officer And Treasurer
NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410-6272
(219) 853-5200
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Bidder)
--------------------------------
COPIES TO:
Peter V. Fazio, Jr., Esq. Alan G. Schwartz, Esq.
Schiff Hardin & Waite Simpson Thacher & Bartlett
6600 Sears Tower 425 Lexington Avenue
Chicago, Illinois 60606 New York, New York 10017
Telephone: (312) 258-5500 Telephone: (212) 455-2000
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This Amendment No. 4 (this "Amendment") amends and supplements
the Tender Offer Statement on Schedule 14D-1, as amended, originally
filed with the Securities and Exchange Commission on June 25, 1999
(the "Schedule 14D-1") by CEG Acquisition Corp., a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of NiSource
Inc., an Indiana corporation ("Parent"). The Schedule 14D-1 and this
Amendment relate to a tender offer by the Offeror to purchase all of
the outstanding shares of common stock, par value $.01 per share (the
"Shares"), of Columbia Energy Group, a Delaware corporation (the
"Company"), at a purchase price of $68 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated June 25, 1999
(the "Offer to Purchase"), and in the related Letter of Transmittal
(which, as either may be amended or supplemented from time to time,
collectively constitute the "Offer"), copies of which are filed with
the Schedule 14D-1 as Exhibits (a)(1) and (a)(2), respectively.
2
Item 10. Additional Information.
On July 8, 1999, Parent and the Offeror amended their complaint
in NiSource Inc. and CEG Acquisition Corp. vs. Columbia Energy Group
et al., which was originally filed in United States District Court,
District of Delaware on June 24, 1999. The First Amended Complaint is
included herein as Exhibit (g)(3) and incorporated herein by
reference.
Item 11. Material to be Filed as Exhibits.
(a)(1) Offer to Purchase, dated June 25, 1999.*
(a)(2) Letter of Transmittal.*
(a)(3) Letter dated June 25, 1999, from Dealer Manager to brokers,
dealers, commercial banks, trust companies and other
nominees.*
(a)(4) Letter dated June 25, 1999, to be sent by brokers, dealers,
commercial banks, trust companies and other nominees to
their clients.*
(a)(5) Notice of Guaranteed Delivery.*
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.*
(a)(7) Form of Summary Advertisement, dated June 25, 1999.*
(a)(8) Press Release issued by Parent on June 24, 1999.*
(a)(9) Form of letter dated June 28, 1999 from Gary L. Neale,
Chairman, President and Chief Executive Officer of Parent,
to investors of the Company.*
(a)(10) Press Release issued by Parent on June 28, 1999.*
(a)(11) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on July 2,
1999.*
(a)(12) Form of letter dated July 2, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of Parent,
to directors of the Company.*
(a)(13) Press Release issued by Parent on July 6, 1999.*
(b)(1) Commitment Letter dated June 23, 1999 to Parent from Credit
Suisse First Boston and Barclays Bank PLC.*
(c) Not Applicable.
(d) Not Applicable.
3
(e) Not Applicable.
(f) Not Applicable.
(g)(1) Complaint in NiSource Inc. and CEG Acquisition Corp. vs.
Columbia Energy Group et al., Delaware Chancery Court, New
Castle County.*
(g)(2) Complaint in NiSource Inc. and CEG Acquisition Corp. vs.
Columbia Energy Group et al., United States District Court,
District of Delaware.*
(g)(3) First Amended Complaint in NiSource Inc. and CEG Acquisition
Corp. vs. Columbia Energy Group et al., United States
District Court, District of Delaware.
_______________
*Previously filed.
4
SIGNATURE
After due inquiry and to the best of its knowledge and belief,
each of the undersigned certifies that the information set forth in
this statement is true, complete and correct.
CEG ACQUISITION CORP.
By: /s/ Gary L. Neale
-----------------------------------
Name: Gary L. Neale
Title: President
NISOURCE INC.
By: /s/ Gary L. Neale
-----------------------------------
Name: Gary L. Neale
Title: Chief Executive Officer
Date: July 9, 1999
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
11(a)(1) Offer to Purchase, dated June 25, 1999.*
11(a)(2) Letter of Transmittal.*
11(a)(3) Letter dated June 25, 1999, from Credit Suisse First
Boston Corporation to brokers, dealers, commercial
banks, trust companies and other nominees.*
11(a)(4) Letter dated June 25, 1999, to be sent by brokers,
dealers, commercial banks, trust companies and other
nominees to their clients.*
11(a)(5) Notice of Guaranteed Delivery.*
11(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9*.
11(a)(7) Form of Summary Advertisement, dated June 25, 1999.*
11(a)(8) Press Release issued by Parent on June 24, 1999.*
11(a)(9) Form of letter dated June 28, 1999 from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to investors of the Company.*
11(a)(10) Press Release issued by Parent on June 28, 1999.*
11(a)(11) "NiSource/Columbia StraightTalk" communication to
stockholders of the Company issued by Parent on July 2,
1999.*
11(a)(12) Form of letter dated July 2, 1999, from Gary L. Neale,
Chairman, President and Chief Executive Officer of
Parent, to directors of the Company.*
11(a)(13) Press Release issued by Parent on July 6, 1999.*
11(b)(1) Commitment Letter dated June 23, 1999 to Parent from
Credit Suisse First Boston and Barclays Bank PLC.*
11(g)(1) Complaint in NiSource Inc. and CEG Acquisition Corp.
vs. Columbia Energy Group et al., Delaware Chancery
Court, New Castle County.*
11(g)(2) Complaint in NiSource Inc. and CEG Acquisition Corp.
vs. Columbia Energy Group et al., United States
District Court, District of Delaware.*
11(g)(3) First Amended Complaint in NiSource Inc. and CEG
Acquisition Corp. vs. Columbia Energy Group et al.,
United States District Court, District of Delaware.
_________________
*Previously filed.
7
EXNIBIT 11(g)(3)
----------------
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
- - - - - - - - - - - - - - - - - -
NISOURCE INC. AND :
CEG ACQUISITION CORP., :
:
Plaintiffs, :
: C.A. No. 99-400-GMS
v. :
:
COLUMBIA ENERGY GROUP, :
RICHARD F. ALBOSTA, ROBERT H. :
BEEBY, WILSON K. CADMAN, JAMES P. :
HEFFERNAN, KAREN L. HENDRICKS, :
MALCOLM T. HOPKINS, J. BENNETT :
JOHNSTON, MALCOLM JOZOFF, :
WILLIAM E. LAVERY, GERALD E. MAYO, :
DOUGLAS E. OLESEN, AND OLIVER G. :
RICHARD III, :
:
Defendants. :
- - - - - - - - - - - - - - - - - -
FIRST AMENDED COMPLAINT FOR
DECLARATORY AND INJUNCTIVE RELIEF
---------------------------------
Plaintiffs NiSource Inc. and CEG Acquisition Corp.
(hereinafter "NiSource" or "Plaintiffs"), by their undersigned
attorneys, for their First Amended Complaint against Defendants allege,
upon knowledge as to those allegations which pertain to themselves and
otherwise upon information and belief, as follows:
JURISDICTION AND VENUE
----------------------
1. The claims asserted herein arise under and pursuant to
Sections 20(a) and 27 of the Securities Exchange Act of 1934
("Exchange Act"), 15 U.S.C. Sections 78aa and 78t(a), and common law.
2. This Court has subject matter jurisdiction over this
action pursuant to Section 27 of the Exchange Act, 15 U.S.C. Sections
78aa, and 28 U.S.C. Sections 1331, 1367 and 2201, and principles of
pendent and supplemental jurisdiction.
3. This Court also has subject matter jurisdiction over
Counts 2, 3 and 4 of the Complaint pursuant to 28 U.S.C. Section 1332
because diversity of citizenship exists between Plaintiffs and the
Director Defendants and the amount in controversy exceeds $75,000,
exclusive of costs and interest.
4. Venue lies in this District under Section 27 of the
Exchange Act, 15 U.S.C. Section 78aa and 28 U.S.C. Section 1391(b) and
(c).
THE PARTIES
-----------
5. Plaintiff NiSource Inc. (formerly known as NIPSCO
Industries, Inc.) is an Indiana corporation with its principal place
of business at 801 East 86th Avenue, Merrillville, Indiana 46410, and
its registered office at 5265 Hohman Avenue, Hammond, Indiana 46320.
NiSource, by its affiliates, is a stockholder of Columbia Energy
Group.
6. Plaintiff CEG Acquisition Corp. is a Delaware
corporation with its principal place of business at 801 East 86th
Avenue, Merrillville, Indiana 46410. CEG Acquisition Corp. is a
wholly-owned subsidiary of NiSource.
7. Defendant Columbia Energy Group ("CEG") (originally
incorporated as Columbia Gas & Electric Corporation and formerly known
as The Columbia Gas System, Inc.) is a Delaware corporation with its
principal place of business at 13880 Dulles Corner Lane, Herndon,
Virginia 20171. CEG's common stock is registered pursuant to Section
12-b of the Exchange Act, 15 U.S.C. Section 78, and listed and traded
on the New York Stock Exchange.
8. Defendant Oliver G. Richard III ("Richard") is a
citizen of Virginia and at all relevant times has been the Chief
Executive Officer, Chairman, President and a director of Defendant
CEG.
9. Defendant Richard F. Albosta ("Albosta") is a citizen
of New Jersey and at all relevant times has been a director of
Defendant CEG.
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10. Defendant Robert H. Beeby ("Beeby") is a citizen of
Connecticut and at all relevant times has been a director of Defendant
CEG.
11. Defendant Wilson K. Cadman ("Cadman") is a citizen of
Kansas and at all relevant times has been a director of Defendant CEG.
12. Defendant James P. Heffernan ("Heffernan") is a citizen
of New York and at all relevant times has been a director of Defendant
CEG.
13. Defendant Karen L. Hendricks ("Hendricks") is a citizen
of Ohio and at all relevant times has been a director of Defendant
CEG.
14. Defendant Malcolm T. Hopkins ("Hopkins") is a citizen
of North Carolina and at all relevant times has been a director of
Defendant CEG.
15. Defendant J. Bennett Johnston ("Johnston") is a
resident of the District of Columbia and at all relevant times has
been a director of Defendant CEG.
16. Defendant Malcolm Jozoff ("Jozoff") is a citizen of
Arizona and at all relevant times has been a director of Defendant
CEG.
17. Defendant William E. Lavery ("Lavery") is a citizen of
Virginia and at all relevant times has been a director of Defendant
CEG.
18. Defendant Gerald E. Mayo ("Mayo") is a citizen of South
Carolina and at all relevant times has been a director of Defendant
CEG.
19. Defendant Douglas E. Olesen ("Olesen") is a citizen of
Ohio and at all relevant times has been a director of Defendant CEG.
20. Defendants Albosta, Beeby, Cadman, Heffernan,
Hendricks, Hopkins, Johnston, Jozoff, Lavery, Mayo, Olesen and Richard
are collectively referred to herein as the "Director Defendants."
BACKGROUND OF THE ACTION
------------------------
21. By this action, Plaintiffs seek to stop Defendants from
disseminating a series of false and misleading statements about
Plaintiff's offer to purchase the stock of CEG. Defendants continue
to repeat such false and misleading statements in public securities
filings with the Securities and Exchange Commission ("SEC"), in press
releases and in interviews widely disseminated in the media.
Specifically, this action seeks declaratory as well as injunctive
3
relief in connection with an offer first announced by NiSource on June
7, 1999 and a subsequent tender offer ("Tender Offer") announced by
NiSource on June 24, 1999 and commenced on June 25, 1999 for all
outstanding shares of Defendant CEG.
22. CEG's current directors and management have made a
number of statements intended to unfairly disparage any possible
transaction with Plaintiffs and have taken a series of actions
intended to prevent the shareholders of CEG from considering the
Tender Offer, and these Defendants have now improperly rejected the
repeated overtures from NiSource seeking a negotiated business
combination of the two companies.
23. Unless enjoined, Defendants will continue (i) to
deprive CEG's shareholders from having a meaningful opportunity to
consider the Tender Offer, (ii) to publish false and misleading
statements and omissions concerning the June 7 offer and subsequent
Tender Offer, and (iii) to take other steps in breach of their
fiduciary duties.
24. On April 1, 1999, Gary L. Neale, the Chairman and Chief
Executive Officer of NiSource, met with Defendant Richard, the
Chairman and Chief Executive Officer of CEG, to discuss a possible
merger of their two companies. During this meeting, Mr. Neale
proffered a letter to Mr. Richard proposing an all-cash, all shares
acquisition of CEG by NiSource at a premium price of $63 per share.
The letter provided the proposed terms of the deal and expressed
NiSource's desire "to discuss this proposal at greater length." Mr.
Richard's response to the letter was a request that NiSource withdraw
the offer and that the two meet on April 16, 1999 for further
discussions. NiSource agreed to do so based on Mr. Richard's
representation that he was willing to meet and talk.
25. However, on April 15, 1999, the day before the
scheduled meeting between NiSource and CEG, Mr. Richard unilaterally
canceled the meeting with Mr. Neale, without providing any
explanation.
26. On April 16, 1999, Mr. Neale wrote again to Mr.
Richard, once again indicating NiSource's desire to discuss a friendly
merger of CEG and NiSource, and proposing immediate discussions to
address how the merger could be structured on a negotiated basis.
27. On April 18, 1999, Mr. Richard dismissed NiSource's
offer indicating that CEG was not for sale and stating the desire for
CEG to "remain[] independent." Mr. Richard went so far as to state
that "there is no interest in negotiating any transaction with
[NiSource]." Instead, in an effort to deflect NiSource's advances and
prevent another company from acquiring control of CEG, on or about
April 18 CEG took the extraordinary step of commencing a bid to
acquire Consolidated Natural Gas Company ("CNG"), which already had
entered into a definitive and binding merger agreement with another
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company, Dominion Resources, Inc. ("Dominion"). CEG's unsolicited bid
to break up the friendly merger between CNG and Dominion ultimately
failed.
28. Against this background, CEG held its annual meeting of
shareholders on May 19, 1999. CEG's Restated Certificate of
Incorporation requires the corporation to have a Board of Directors of
not less than 13 directors divided into three classes, each to serve a
three-year term. At the time of the May 19, 1999 annual meeting, the
class of directors to be elected in 1999 consisted of five directors.
One of those directors was retiring and chose not to stand for
reelection. In contravention of CEG's corporate charter, however,
CEG's Board of Directors proposed a slate of only four directors for
shareholder vote. The effect of Defendants' actions, in failing to
provide the shareholders with an opportunity to elect a successor for
the fifth expiring director, was to ensure that the Director
Defendants would not be confronted with the independent judgment of a
non-incumbent director during a time when the Director Defendants were
committed to presenting a unified front to resist NiSource's advances,
which the Director Defendants anticipated NiSource would continue to
pursue.
29. NiSource's bankers subsequently sought to contact the
bankers for CEG to pursue the potential for a negotiated merger of the
companies. On May 28, 1999, CEG's bankers advised that CEG was
unwilling to engage in further discussions.
30. Neither Mr. Richard, nor anyone else from CEG, has
adequately responded to the repeated invitations from NiSource or
explained the basis for the refusal to engage in substantive
discussions.
31. On June 7, 1999, Mr. Neale again wrote to Mr. Richard
advising of NiSource's continued interest in exploring a merger on
negotiated terms and proposing an acquisition of CEG by NiSource for
an increased premium price of $68 per share. Mr. Neale again offered
to discuss the terms of such a proposal with Mr. Richard and indicated
NiSource's preference for "work[ing] together with [Mr. Richard] and
[the CEG] Board to complete a transaction."
32. By letter dated June 7, 1999, Mr. Richard responded to
Mr. Neale advising that CEG was not for sale and that CEG "is not
interested in any merger transactions in which another company
acquires control of Columbia." Nevertheless, Mr. Richard stated that
in light of the formal offer by NiSource, he would present the offer
to the rest of CEG's board.
33. On June 10, 1999, the CEG board met ostensibly to
consider the NiSource offer. Despite having taken only 72 hours to
consider the offer after it was made, and without adequate
consideration of the offer or even discussing the offer with NiSource
or exploring alternative proposals with NiSource, CEG's board flatly
5
rejected the offer. In a June 10, 1999 letter to Mr. Neale describing
the rejection of the NiSource offer, Mr. Richard stated that the board
had concluded that the proposed consideration was inadequate, even
though the offer represented a premium of 31% above the average
trading price of CEG's stock for the twenty trading day period
preceding the offer. Mr. Richard's letter foreclosed any further
discussion of the offer from NiSource and flatly stated that the
"decision not to pursue [NiSource's] proposal is final." The contents
of the June 10 letter also were widely disseminated by CEG in a press
release which contained the additional false and misleading claim that
"NiSource's public statements, including their expectations as to the
regulatory timing and the potential benefits of their strategy for a
combined company, are simply not realistic."
34. In subsequent public statements, CEG continued to
falsely and misleadingly claim that NiSource "does not provide a good
fit" for CEG, that the NiSource bid is "inadequate" and
"insufficient," while reiterating that the position of its board
remains that the company is not for sale and not interested in any
merger in which another company acquires control of CEG. On June 22,
1999, CEG issued a public statement further disparaging NiSource,
asserting, among other things, that "the board [has] determined the
NiSource offer was inadequate," and that NiSource is "attempting a
1980s-style, hostile leveraged buyout of our company" in an effort to
purchase CEG "cheaply."
35. Despite NiSource's continued desire to conclude a
negotiated transaction, CEG's lack of a constructive response combined
with CEG's definitive statement that it would not consider a
transaction with NiSource led NiSource to commence its Tender Offer on
June 25, 1999 in order to ensure that its premium bid of $68 would be
brought to CEG's shareholders for their consideration.
36. Pursuant to the Tender Offer, NiSource seeks to
purchase for cash all outstanding shares of CEG at $68 per share. The
price NiSource is offering CEG's shareholders represents a premium of
22% above the reported closing price of CEG's common stock on June 4,
1999, the day before NiSource publicly offered to acquire CEG, and is
31% above the average trading price of CEG's stock for the twenty
trading day period preceding the offer.
37. The Tender Offer is made in contemplation of a business
combination between plaintiffs and CEG at $68 per share (the
"Merger"). The Tender Offer is not "front-end loaded" -- that is, the
consideration offered is not part cash and part stock, and it does not
offer a higher price than non-tendering shareholders would receive in
the Merger. Nor is the Tender Offer coercive, as it offers all cash
consideration and treats all CEG shareholders equally.
38. Consistent with the requirements of Section 14(d)-(e)
of the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d)-(e)
(the Williams Act), and the rules and regulations promulgated
6
thereunder by the SEC, the Tender Offer, which is a significant
transaction in interstate commerce, is scheduled to expire on August
6, 1999.
39. CEG's shareholders -- the owners of the company -- have
an undeniable right to consider NiSource's premium offer without
interference from Defendants, and without being confused or misled by
Defendants' false and misleading statements. Defendants should permit
the shareholders to make their own, fully-informed decisions as to the
long-term direction of the company. The Tender Offer in no way
threatens the interests of CEG or its shareholders. Accordingly,
there is no justification for Defendants' efforts to obstruct and
interfere with NiSource's premium bid.
DEFENDANTS' RULE 14D-9 STATEMENT
--------------------------------
40. Pursuant to SEC Rule 14d-9, the management of a company
subject to a tender offer must publicly state its position with
respect to the tender offer within ten business days of the date the
tender offer is first published or made to security holders. The
position of the management of the company subject to the tender offer
must be set forth in a Schedule 14D-9 Solicitation/Recommendation
Statement ("14D-9"). The 14D-9 must set forth, among other things,
whether the management of the company subject to the tender offer
recommends that security holders accept or reject the offer, or state
that management expresses no opinion or is unable to take a position
concerning the offer. The 14D-9 must be filed with the SEC, which
requires, among other things, that all statements in the 14D-9 be true
and not misleading.
41. On July 6, 1999, CEG filed its 14D-9 in response to the
Tender Offer. In that 14D-9, CEG has continued to make materially
false and misleading statements and omissions concerning NiSource's
Tender Offer in an effort to undermine shareholder support.
42. The 14D-9 is materially false and misleading in stating
that NiSource's offer is "inadequate, and not in the best interests of
the company and its shareholders." In fact, NiSource's offer provides
a substantial premium to CEG shareholders and utilizes multiples that
are very similar to the multiples CEG used in its recent offer to
purchase CNG. Moreover, the 14D-9 is materially misleading because it
states the conclusion that NiSource's offer is "inadequate from a
financial point of view" without ever disclosing the benchmark against
which the financial adequacy of NiSource's offer is being measured.
For instance, CEG never states that it has any basis to believe that
the share price of CEG stock will rise above $68 in any specified time
frame.
43. The 14D-9 also contains the materially false and
misleading assertion that the NiSource offer "is an attempt to take
advantage of short-term business and market factors." This statement
7
is completely unfounded and belied by and omits to tell shareholders
the fact that CEG's shares have never traded at an amount approaching
the price offered by NiSource, as well as the fact that NiSource's
offer presents a substantial premium over the average trading price of
CEG's stock over the twenty trading day period preceding the Tender
Offer. Moreover, while opining on the potential future profitability
of CEG, Defendants omit to inform their shareholders when, if at all,
the future value of CEG share's would exceed the $68 per share price
provided in NiSource's Tender Offer. In addition, this statement also
is materially misleading because it touts the potential advantages of
CEG's "new, non-traditional business opportunities" and its "evolving
competitive markets," without disclosing that there are market and
other risks associated with these "opportunities" and that these risks
might negatively affect CEG's future profitability.
44. The 14D-9 also is materially misleading because it
states that since January 1, 1995, CEG's "total rate of return to
shareholders was approximately 258% or 33.5% on an annual basis" and
that those returns "substantially exceeded returns on the Standard &
Poor's 500 and the S&P Natural Gas Indices during the same time
period." This statement omits to inform shareholders that the base
period used for that analysis begins during CEG's bankruptcy and that
CEG underperforms the Standard & Poor's 500 and the S&P Natural Gas
Indices when other periods are utilized.
45. The 14D-9 is also materially false and misleading in
that it states that the offer is likely to face "negative reaction
from numerous state and federal regulators." In fact, CEG lacks any
good faith basis for this assertion. NiSource does not foresee any
major regulatory obstacles to consummating a merger with CEG.
46. Similarly, CEG's statement that there is a substantial
risk that regulators will not approve NiSource's proposal in light of
NiSource's need to borrow $5.7 billion to consummate the offer is
materially false and misleading. CEG fails to acknowledge that the
financing of this transaction will, within 1 year of the close, result
in a capital structure of approximately 55% debt and 45% equity, a
capital structure which has been commonly used in the utility industry
and approved by regulators. In addition, NiSource's bond ratings have
already been reaffirmed by the various rating agencies, who expressed
no concern over the financing plan to consummate the proposed merger
with CEG. This reaffirmation was publicly disclosed, and therefore
was known to CEG, before CEG submitted its 14D-9.
47. The 14D-9 also is materially false and misleading in
that it discounts NiSource's $68 per share offer to $60.53 per share
based on the assertion that it supposedly is NiSource's own stated
view that the required regulatory approvals "may take as long as 18
months." In point of fact, as NiSource disclosed in its 14D-1, with
Defendants' cooperation the required regulatory approvals are expected
to be completed within 6 to 9 months. NiSource's 14D-1 stated that
these approvals may take between 12 and 18 months only if Defendants
8
refuse to cooperate with NiSource. Moreover, Defendants' utilized a
high-end discount rate of 9.5% in an effort to portray NiSource's
offer as less valuable to CEG shareholders. Finally, CEG provides no
comparable discounting of its stock price in the future. Thus, CEG
shareholders are misled in assessing the NiSource tender.
48. The 14D-9 is further materially false and misleading
because it states that the consummation of the offer may have a
"disruptive effect . . . on the Company's employees, suppliers and
customers and the communities where the Company operates." This
statement fails to inform CEG's shareholders that in fact, there is
almost no overlap between the markets in which NiSource and CEG
operate, and that NiSource has made clear that it does not plan any
layoffs at the operating companies upon consummation of the offer.
Moreover, this statement is misleading because it falsely implies that
the effect on those constituencies is a relevant consideration to
shareholders. NiSource's offer is an all cash offer, not a stock
offer, and tendering shareholders will have no continuing equity
interest in the merged company. Thus, the only relevant consideration
to CEG shareholders is the financial adequacy of an all-cash Tender
Offer.
49. The 14D-9 also falsely and misleadingly states that on
April 1, 1999 CEG's Chief Executive Officer, Defendant Richard,
requested that NiSource withdraw its April 1, 1999 letter and proposal
because the idea of a written proposal pursuant to which NiSource
would acquire Columbia was inappropriate at that time. In fact,
Defendant Richard requested that NiSource withdraw its April 1, 1999
letter, stating that he did not want the proposal disclosed to CEG's
shareholders and the public.
50. Also included as an Exhibit to CEG's 14D-9 is a press
release widely disseminated by Defendants on the same day further
disparaging NiSource's Tender Offer. The press release contains a
statement by Defendant Richard that the "various unsolicited merger
proposals from NiSource have been for the wrong price, at the wrong
time, and with the wrong company" and the statement that a "merger of
our two companies is not compelling." These statements are false and
misleading in that, among other things, they fail to include the fact
that the idea for a strategic combination of the two companies was
first proposed in November 1998 by Defendant Richard. Moreover,
Defendants falsely and misleadingly stated therein that the Tender
Offer "is not in the best interests of Columbia Energy Group and its
shareholders," is "inadequate," is "substantially dilutive," and is
likely to face "negative reaction of numerous state and federal
regulators."
51. Despite the fact that the 14D-9 purportedly identifies
"all material factors" considered by the Board in rejecting the Tender
Offer, Defendants have further misled and confused CEG shareholders by
including additional false and misleading statements in their press
release concerning CEG's 14D-9. These statements include various
9
statements falsely disparaging NiSource's business prospects and the
skills of its management team -- namely that "NiSource's existing
businesses appear to consist primarily of high-cost generation assets
serving low-growth markets" and that "NiSource has yet to prove its
ability to compete successfully in an increasingly deregulated energy
market." These statements are materially false. Moreover, they are
materially misleading to shareholders because, by making them, CEG
implies that such considerations are relevant to shareholders'
consideration of the all-cash Tender Offer. In fact, NiSource's
future prospects have no bearing on whether CEG shareholders should
sell their CEG shares for cash.
52. CEG's press release also stated that NiSource is
"attempting a 1980s-style hostile takeover," implied that NiSource is
"quietly planning massive layoffs or rate increases," and stated that
NiSource has characterized its own Tender Offer and related lawsuits
as a "costly and disruptive . . . waste of valuable resources." These
statements are false and misleading. CEG made them, as well as the
false statements in the previous paragraph, only to disparage NiSource
and to undermine the Tender Offer.
53. Even after the filing of CEG's 14D-9, Defendants
continue to make disparaging, false and misleading public statements
about the Tender Offer in press releases and interviews widely
disseminated in the media. For example, in statements made to the Dow
Jones Newswires on July 6, 1999, Defendants falsely and misleadingly
claimed that NiSource's Tender Offer was "very inadequate," that "the
transaction would be dilutive," that NiSource's proposal would face
"serious regulatory obstacles and a drawn out timetable," and that
"regulators probably will pause at NiSource's need to borrow $5.7
billion for the transaction."
54. In light of CEG's continued rejection of NiSource's
proposals for a negotiated transaction and disparaging statements
about NiSource's Tender Offer, and in light of CEG's above-described
extensive history of protection of its incumbent directors and
officers, including its most recent failure to comply with the
requirement under its corporate charter to propose a slate of five
directors, CEG's current directors and management are likely to
persist in making determined and continuing efforts to deprive CEG's
shareholders of the substantial benefits of NiSource's bid.
55. This action is brought to oppose and prevent such acts.
This action seeks declaratory and injunctive relief concerning (i) the
Defendants' false and misleading statements concerning NiSource's
offer and violations of the Williams Act arising out of their false
and misleading statements and omissions concerning material aspects of
the Tender Offer, (ii) the applicability of the Delaware Business
Combination Act, 8 Del. C. Section 203, and (iii) the legality of a
number of the measures adopted by Defendants and of their conduct in
which they have acted and continue to act in derogation of their duty
to exercise informed and loyal business judgment, in an improper
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attempt to prevent CEG shareholders from freely considering the merits
of NiSource's all cash, equal treatment premium offer.
THE WILLIAMS ACT'S REGULATION OF INTERSTATE TENDER OFFERS
---------------------------------------------------------
56. The Williams Act establishes a comprehensive, uniform
system for regulating interstate tender offers. In enacting the
Williams Act, Congress unequivocally recognized the economic benefits
created by tender offers, which include providing investors with an
opportunity to sell their shares at advantageous premiums over
prevailing market prices and/or providing a mechanism for the removal
of entrenched management failing to generate maximum returns on
shareholders' equity investments.
57. The Williams Act reflects Congress' judgment and
philosophy that shareholders themselves should be able to determine
when it is in their best interests to tender their shares to an
offeror. Thus, the Williams Act deliberately strikes a neutral
balance, favoring neither an offeror nor incumbent management, so that
shareholders' interests receive maximum protection.
58. To achieve these ends, the Williams Act requires that
shareholders be given specific information deemed by the SEC to be
material to their intelligent decision to sell their securities or to
decline an offer. Removing all artificial barriers to the exercise of
shareholder choice, the Williams Act is specifically designed to
enable shareholders to take advantage of tender offers that maximize
their economic interests.
59. Pursuant to its authority under Section 23(a) of the
Exchange Act, the SEC has promulgated comprehensive rules and
regulations governing interstate tender offers in furtherance of
Congress' purposes. The SEC regulations are designed to "ensure a
balance between the interests of the person making a tender offer and
the management of the company whose securities are being sought while
providing disclosure and substantive protections to shareholders
making investment decisions." (Exchange Act Release No. 1).
THE DELAWARE BUSINESS COMBINATION STATUTE
-----------------------------------------
60. While intended to grant management the ability to
consider tender offers, the Delaware Business Combination Act is being
misapplied to the Tender Offer by Defendants in an effort to entrench
current management in derogation of the shareholders' right to elect
management. The legislative history of 8 Del. C. Section 203 makes
clear that it was intended to protect shareholders from the coercive
aspects of some tender offers, in particular, the coerciveness
inherent in the possibility of second-step freezeouts at a lower
price. However, in the present case, the Tender Offer in no way
threatens the interests of CEG shareholders or implicates the purpose
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of the Delaware Act, insofar as it presents an all cash, equal
treatment premium offer. Defendants' actions in obstructing
shareholder consideration of the offer are fundamentally inconsistent
with the Williams Act, which seeks to regulate tender offers in a
comprehensive and neutral fashion favoring neither an offeror nor
incumbent management.
61. Pursuant to 8 Del. C. Section 203(a) and (c)(5), a
holder (other than the corporation and any direct or indirect
majority-owned subsidiary of the corporation) of 15% or more of the
outstanding voting stock of a company (an "interested stockholder" as
used in this paragraph) may not engage in any business combination
with the corporation for a period of 3 years following the date that
such stockholder became an interested stockholder, unless (i) the
transaction receives board approval prior to the holder becoming an
interested stockholder, (ii) the interested stockholder owns 85% of
the outstanding shares of the corporation at the time it becomes an
interested stockholder, excluding those shares owned by directors,
officers and certain ESOPs, or (iii) the transaction is subsequently
approved by the corporation's board of directors and authorized by the
vote of at least two thirds of the outstanding voting stock which is
not owned by the interested stockholder.
62. The Defendants, by rejecting the repeated efforts of
Plaintiffs to discuss a proposed negotiated merger and by rejecting
the Tender Offer and disseminating disparaging statements about the
same, have effectively demonstrated that they will not approve of the
Tender Offer or any other offer by Plaintiffs pursuant to 8 Del. C.
Section 203(a)(1). Defendant Richard's letters to NiSource of April
18, 1999, June 10, 1999 and July 6, 1999 confirm that CEG will not
give fair consideration to any proposal from NiSource. Indeed, up
until immediately before announcing the Tender Offer, Plaintiffs
continued to try to initiate discussions with Defendants, but to no
avail.
63. The effects on the proposed merger resulting from
Defendants' refusal to fairly consider any offer from NiSource is
magnified by the substantial regulatory approval process associated
with mergers involving public utility companies. Prior to the
consummation of any merger between NiSource and CEG, it will be
necessary to obtain both federal and state regulatory approval.
Absent CEG's cooperation, NiSource will face enormous obstacles as a
hostile bidder, undoubtedly including resistance from CEG and its
directors. Taken together with the Defendants' defensive actions, the
regulatory approval process for merger transactions in the utilities
industry makes its very unlikely that NiSource would be able to
consummate a successful merger with CEG.
64. The Complaint seeks, among other things, an order (i)
requiring Defendants to take all actions necessary to exempt the
Tender Offer from the restrictions of 8 Del. C. Section 203, and (ii)
preliminarily and permanently enjoining the Defendants, their
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employees, agents and all persons acting on their behalf or in concert
with them from taking any actions to impede or interfere with the
sale, transfer on disposition of CEG stock to Plaintiffs or from
entering into any other extraordinary corporate transaction to impede
the Tender Offer.
COUNT I
-------
(Injunctive Relief As Against All Defendants:
Violations of the Williams Act)
65. Plaintiffs repeat and reallege each and every
allegation contained in paragraphs 1 through 64 as if set forth in
full herein.
66. Through their dissemination of the 14D-9 and press
releases, interviews and other statements to the public and CEG
shareholders, Defendants made statements in connection with NiSource's
offer to purchase the outstanding shares of CEG.
67. Defendants knew that, at the time the statements were
disseminated, they contained false and misleading misstatements.
68. Defendants knew that, at the time the statements were
disseminated, they omitted facts necessary to make the statements not
materially false and misleading and it is likely that Defendants will
continue to make such statements concerning the Tender Offer.
69. Defendants' dissemination of false and misleading
statements to CEG shareholders and the public at large constitutes a
violation of the Williams Act.
70. Defendants' violation of the Williams Act irreparably
harmed Plaintiffs by creating misperceptions concerning the Tender
Offer among shareholders of CEG common stock, and thereby threatening
the viability of the Tender Offer.
71. By reason of the foregoing, Plaintiffs, pursuant to the
Williams Act, seek a preliminary and permanent injunction (i)
enjoining Defendants from making any further false or misleading
statements or omissions concerning the Tender Offer; and (ii) ordering
Defendants to issue a communication to all CEG shareholders correcting
all of its false or misleading statements concerning the Tender Offer.
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COUNT II
--------
(Injunctive Relief As Against The Individual Director Defendants:
The Delaware Business Combination Statute)
72. Plaintiffs repeat and reallege each and every
allegation contained in paragraphs 1 through 71 as if fully set forth
herein.
73. The Director Defendants may exempt the Tender Offer
from the restrictions of 8 Del. C. Section 203 by approving the Tender
Offer and the contemplated Merger prior to Plaintiffs' acceptance for
payment of shares tendered pursuant to the offer.
74. The Director Defendants owe fiduciary duties of care,
good faith and loyalty to the CEG shareholders.
75. Should the Director Defendants fail to take all actions
necessary to exempt the Tender Offer from the requirements of 8 Del.
C. Section 203(a), the Director Defendants will be in breach of their
fiduciary duties by failing to permit the CEG shareholders to receive
the benefit of NiSource's all-cash, premium offer and by favoring the
incumbent management's present course of action.
76. The offer contains a contingency for CEG's exemption
from the Delaware Business Combination statute. Should the Director
Defendants fail to provide such exempt status, the shareholders of CEG
likely will be deprived of the ability to tender their shares. The
Director Defendants' failure to provide such exempt status is certain
to have a significant chilling effect on the Tender Offer in light of
the contingency, thereby rendering it extremely unlikely that NiSource
would be able to obtain the threshold 85% of CEG's outstanding shares
necessary to avoid the provisions of 8 Del. C. Section 203(a).
77. Accordingly, if 8 Del. C. Section 203(a) is deemed
applicable to the Tender Offer and the Director Defendants fail to
exempt the Offer from these requirements, Plaintiffs and the other CEG
shareholders will suffer irreparable harm.
78. Plaintiffs have no adequate remedy at law.
79. Unless the Court enjoins the Director Defendants, the
actual, threatened and potential enforcement by Defendants of the
Delaware Business Combination statute will cause immediate, serious
and irreparable injury to Plaintiffs and to the other shareholders of
CEG in the following respects, among others:
a. Plaintiffs will be deprived of the opportunity to
acquire control of and to enter into a business combination with CEG,
a unique business opportunity that may never recur; and
b. CEG shareholders will be deprived of an
opportunity to tender their shares at the significant premium pursuant
to the Tender Offer.
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COUNT III
---------
(Injunctive Relief As Against The Individual Director Defendants:
Other Unlawful Defensive Maneuvers)
80. Plaintiffs repeat and reallege each and every
allegation contained in paragraphs 1 through 79 as if set forth in
full herein.
81. The Director Defendants have a history of acts which
are intended to prevent the shareholders of the company from having a
fair and free opportunity to consider tender offers and to otherwise
exercise their ownership rights over the corporation. As evidenced by
their prior conduct, Director Defendants are imminently likely to take
further actions that would irreparably injure Plaintiffs in their
attempt to acquire CEG.
82. The Director Defendants owe fiduciary duties of care,
good faith and loyalty to the CEG shareholders.
83. Should the Director Defendants take further actions to
prevent the negotiated acquisition by NiSource of the shares of CEG,
these Defendants will be in breach of their fiduciary duties by
failing to permit the CEG shareholders to receive the benefit of
NiSource's all-cash, premium offer and by favoring the incumbent
management's present course of action.
84. Plaintiffs have no adequate remedy at law.
85. Unless the Court enjoins the Director Defendants, the
actual, threatened and potential improper defensive maneuvers will
cause immediate, serious and irreparable injury to Plaintiffs and to
the other shareholders of CEG in the following respects, among others:
a. Plaintiffs will be deprived of the opportunity to
acquire control of and to enter into a business combination with CEG,
a unique business opportunity that may never recur; and
b. CEG shareholders will be deprived of an
opportunity to tender their shares at the significant premium pursuant
to the Tender Offer.
86. Defendants and their assigns and successors, agents,
employees, attorneys, servants, and all persons acting in concert or
participation with the Director Defendants should also be enjoined
from commencing or participating in any legal action or proceeding in
any state or federal court, or before any state or federal
administrative agency, which in any manner seeks to affect, impede,
restrain or concern in any manner the Tender Offer and all related
activities.
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COUNT IV
--------
(Injunctive Relief As Against The Individual Director Defendants:
Violations of Section 20 of the Exchange Act)
87. Plaintiffs repeat and reallege each and every
allegation contained in paragraphs 1 through 86 as if set forth in
full herein.
88. By virtue of their positions as directors of CEG, the
Director Defendants are controlling persons of CEG within the meaning
of Section 20 of the Exchange Act.
89. Accordingly, Director Defendants are liable for the
wrongs of CEG as alleged in this Complaint.
WHEREFORE, Plaintiffs respectfully request that this Court
enter an Order:
1. Requiring the Director Defendants to take all actions
necessary to exempt the Tender Offer from the restrictions of 8 Del.
C. Section 203;
2. Declaring and adjudging the Director Defendants to be
in breach of their fiduciary duties if they fail to exempt the Tender
Offer from the restrictions of 8 Del. C. Section 203(a);
3. Declaring that the Tender Offer is a non-coercive,
valid and legitimate offer, in complete compliance with the
requirements of the Williams Act;
4. Preliminarily and permanently enjoining Defendants and
their assigns and successors, agents, employees, attorneys, servants,
and all persons in active concert or participation with them, from
refusing to take actions that may be necessary under the Delaware
Business Combination Act to effect a business combination between
Plaintiffs and CEG;
5. Preliminarily and permanently enjoining the Defendants,
their employees, agents and all persons acting on their behalf or in
concert with them from taking any actions to impede or interfere with
the sale, transfer or disposition of CEG stock to Plaintiffs or from
entering into any other extraordinary corporate transaction to impede
the Tender Offer;
6. Preliminarily and permanently enjoining the Defendants,
their employees, agents and all persons acting on their behalf or in
concert with them from commencing or participating in any legal
action or proceeding in any state or federal court, or before any
state or federal administrative agency, which in any manner seeks to
affect, impede, restrain, or concern in any manner the Tender Offer;
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7. Preliminarily and permanently enjoining Defendants and
their assigns and successors, agents, employees, attorneys, servants,
and all persons in active concert or participation with them, from
taking any action prohibited by applicable provisions of state or
federal law in an effort to improperly impede the Tender Offer;
8. Awarding Plaintiffs the costs and disbursement of this
action, including reasonable attorneys' fees, accountants' and
experts' fees; and
9. Such further relief as the Court deems just and proper.
Of Counsel: POTTER ANDERSON & CORROON LLP
Paul E. Dengel /s/ Philip A. Rovner
SCHIFF HARDIN & WAITE -------------------------------
6600 Sears Tower Robert K. Payson (#274)
Chicago, IL 60606 Arthur L. Dent (#2491)
(312) 258-5500 Philip A. Rovner (#3215)
Hercules Plaza
Michael J. Chepiga 1313 N. Market Street
SIMPSON THACHER & BARTLETT P.O. Box 951
425 Lexington Avenue Wilmington, Delaware 19899
New York, NY 10017
(212) 455-2000 Attorneys for Plaintiffs
NiSource Inc. and CEG Acquisition Corp.
Dated: July 8, 1999
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