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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. 50)
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. 50 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, September 27, 1999, September 28, 1999, September 29, 1999,
September 30, 1999, October 1, 1999, October 4, 1999, October 5, 1999,
October 6, 1999, October 7, 1999, October 12, 1999, October 13, 1999,
October 14, 1999 and October 18, 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 2. TENDER OFFER OF THE BIDDER.
Item 2 is hereby supplemented and amended by adding the following paragraph:
On October 17, 1999, Bidder publicly announced its intention to increase the
price per Share to be paid pursuant to the Offer from $68.00 per Share to $74.00
per Share (the "Revised Offer Price"), net to the Seller in cash without
interest thereon, upon the terms and subject to the conditions set forth in the
Supplement to the Offer to Purchase, dated October 18, 1999 (the "Supplement")
and in the revised Letter of Transmittal (together, the "Revised Offer").
Pursuant to the Supplement, the Revised Offer is scheduled to expire at 12:00
midnight, New York City time, on Friday, November 12, 1999, unless and until
Bidder shall have further extended the period of time during which the Revised
Offer is to remain open.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Item 4 (a-b) is hereby supplemented and amended by adding the following
paragraphs:
(a) At a meeting of the Board held on October 22, 1999, the Board carefully
considered the Company's business, financial condition and prospects, the
terms and conditions of the Revised Offer, possible strategic
alternatives to the Revised Offer and other matters, including
presentations by its management and legal and financial advisors.
At the October 22, 1999 meeting, the Board unanimously concluded, among
other things, that the Revised Offer is inadequate and not in the best interests
of the Company or its shareholders. ACCORDINGLY, THE BOARD STRONGLY RECOMMENDS
THAT THE COMPANY'S SHAREHOLDERS REJECT THE REVISED OFFER AND NOT TENDER THEIR
SHARES PURSUANT TO THE REVISED OFFER.
A copy of the letter to shareholders communicating the Board's
recommendation and a form of press release announcing such recommendation are
filed as Exhibits (a)(36) and (a)(37) hereto, respectively, and are incorporated
herein by reference.
(b) In reaching the conclusions referred to in Item 4(a), the Board took
into account numerous factors, including but not limited to the
following:
(i) The Board's familiarity with the business, financial condition,
prospects and current business strategy of the Company, the nature of
the industries in which the Company operates and the Company's strong
position in these industries.
(ii) The written opinions to the Board of each of Morgan Stanley Dean
Witter ("Morgan Stanley") and Salomon Smith Barney Inc. ("Salomon
Smith Barney") to the effect that, as of October 22, 1999, the $74.00
per share consideration set forth in the Revised Offer was
<PAGE>
inadequate from a financial point of view to the Company's
shareholders other than NiSource and its affiliates, and the analyses
performed by Morgan Stanley and Salomon Smith Barney in connection
with the delivery of their opinions. Such written opinions delivered
to the Board are filed herewith as Exhibits (a)(38) and (a)(39). The
Company's shareholders are urged to read such opinions in their
entirety. Such opinions were expressed after review of various
financial criteria used in assessing an offer, and were based on
various assumptions and subject to various limitations, which were
reviewed for the Board as part of the Board presentations by Morgan
Stanley and Salomon Smith Barney.
(iii) The significant conditions to which the Revised Offer is subject.
Twelve conditions and many more sub-conditions must be satisfied or
waived before Bidder is obligated to consummate the Revised Offer.
Many of the conditions are at the sole discretion of Bidder or
subject to external events not directly related to the Company,
including the receipt of numerous federal, state and local public
utility regulatory consents and approvals, the absence of threatened
or instituted actions by any governmental authorities or other
persons which might diminish benefits expected by Bidder, the lack of
any changes in the general economic or financial market conditions in
the United States or abroad that could have a material adverse effect
on any of the Company's subsidiaries, and that no tender or exchange
offer for some or all of the Shares shall have been publicly
announced by a third party.
(iv) The serious regulatory hurdles associated with the Revised Offer,
including the likely negative reaction of numerous state and federal
regulators to NiSource's need to borrow $6.5 billion to consummate
the Offer, creating a highly leveraged debt-to-capital ratio of 86%.
(v) The Board's decision to authorize the Company's management, with the
assistance of the Company's financial advisors, Morgan Stanley and
Salomon Smith Barney and legal advisors, to investigate and evaluate
a number of strategic alternatives to generate value in excess of
that which the Company's business plan or the Revised Offer can
create.
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive but includes all material factors
considered by the Board. In reaching its determination to reject the Revised
Offer, the Board did not assign any relative or specific weights to the
foregoing factors, and individual directors may have given differing weights to
different factors. Throughout its deliberations, the Board received the advice
of its legal and financial advisors.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
Item 7 (a-b) is hereby supplemented and amended by adding the following:
The Board has instructed management, with the assistance of the Company's
financial and legal advisors, to explore strategic alternatives to generate
value in excess of that which the Company's business plan or the Revised Offer
can create, including, without limitation (i) an extraordinary transaction, such
as a merger or reorganization, involving the Company or any of its subsidiaries;
or (ii) a sale or transfer of a material amount of assets by the Company or any
of its subsidiaries.
As a result, representatives of the Company will initiate discussions with
one or more third parties that could relate to or result in one of the
transactions mentioned above.
The Board has determined that disclosure with respect to the parties to, and
the possible terms of, any transactions or proposals of the type referred to in
the preceding paragraphs might jeopardize any discussions or negotiations that
the Company may conduct. Accordingly, the Board has adopted a resolution
instructing management not to disclose the possible terms of any such
transactions or proposals, or the parties thereto, unless and until a definitive
agreement or any agreement in principle relating thereto has been reached or,
upon the advice of counsel, as may otherwise be required by law.
2
<PAGE>
There can be no assurance, however, that these activities will result in any
transaction being recommended to the Board or that any transaction which may be
recommended will be authorized or consummated.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby supplemented and amended by adding the following:
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Exhibit (a)(36) -- Form of Letter to Shareholders, dated October 25, 1999.
Exhibit (a)(37) -- Form of Press Release, dated October 24, 1999.
Exhibit (a)(38) -- Opinion of Morgan Stanley Dean Witter, dated October 22,
1999.
Exhibit (a)(39) -- Opinion of Salomon Smith Barney Inc., dated October 22,
1999.
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3
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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.
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Dated: October 25, 1999 COLUMBIA ENERGY GROUP
By: /s/ MICHAEL W. O'DONNELL
-----------------------------------------
Name: Michael W. O'Donnell
Title: Senior Vice President
and Chief Financial Officer
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4
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EXHIBIT LIST
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<C> <S> <C>
Exhibit (a)(36) -- Form of Letter to Shareholders, dated October 25, 1999.
Exhibit (a)(37) -- Form of Press Release, dated October 24, 1999.
Exhibit (a)(38) -- Opinion of Morgan Stanley Dean Witter, dated October 22,
1999.
Exhibit (a)(39) -- Opinion of Salomon Smith Barney Inc., dated October 22,
1999.
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5
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[LOGO]
October 25, 1999
Dear Shareholder:
I am writing to inform you about two important developments related to your
company's ongoing efforts to build value for our shareholders. The first is a
determination by Columbia's Board of Directors that NiSource Inc.'s latest
proposal is inadequate and not in the best interests of Columbia or its
shareholders.
The second development is a decision by the Board to authorize the company's
management and its advisors to explore and evaluate a number of strategic
alternatives to generate value in excess of that which Columbia's business plan
or the NiSource proposal can create. The Board has taken this important step in
recognition of the current business environment and many opportunities available
in the rapidly evolving energy industry.
As part of the review process authorized by the Board, we will initiate
discussions with third parties regarding possible transactions, such as a
merger, reorganization, or the disposition of a material amount of assets. While
there can be no assurance that this process will result in a transaction or
other action, we believe that engaging in this process will provide us the
flexibility necessary to ensure that Columbia will continue to provide superior
value for you, our shareholders, as well as for our customers, employees and the
communities we serve.
As you know, this is a time of tremendous change in the energy industry. For
creative, forward-looking companies like Columbia, it is a time of promising
opportunities, but also of challenges. YOUR BOARD AND MANAGEMENT ARE FIRMLY
COMMITTED TO EXPLORING THOROUGHLY THE OPPORTUNITIES AVAILABLE TO US AND
CONSIDERING ALL POSSIBLE STRATEGIC ALTERNATIVES FOR ENHANCING SHAREHOLDER VALUE.
I believe the action taken by Columbia's Board will enable both Columbia and
NiSource to move beyond the litigation and other counterproductive activities of
the past four months, and to pursue initiatives that are in the best interests
of all of our constituencies.
As you may know, NiSource recently increased the terms and extended the
deadline of its unsolicited tender offer for all of the outstanding shares of
common stock of Columbia Energy Group. YOUR BOARD OF DIRECTORS HAS DETERMINED
THAT NISOURCE'S REVISED OFFER OF $74 PER SHARE IN CASH IS INADEQUATE AND NOT IN
THE BEST INTERESTS OF COLUMBIA'S SHAREHOLDERS. ACCORDINGLY, WE ONCE AGAIN
RECOMMEND THAT YOU DO NOT TENDER YOUR SHARES TO NISOURCE.
<PAGE>
Your Board's determination that NiSource's latest unsolicited offer is
inadequate is based, in part, on written opinions from Morgan Stanley Dean
Witter and Salomon Smith Barney Inc. In addition to the financial inadequacy of
the offer, the Board also continues to be concerned about the significant
conditions and serious regulatory hurdles associated with the NiSource proposal.
We encourage you to read carefully the attached documents, which are
Columbia's amended Schedule 14D-9, including the discussion of the reasons for
your Board's recommendation, the written opinions of the company's financial
advisors, and a press release announcing the Columbia Board's actions.
DO NOT TENDER YOUR SHARES TO NISOURCE OR ITS SUBSIDIARY, CEG ACQUISITION
CORP. 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.
PREVIOUSLY TENDERED SHARES CAN BE WITHDRAWN AT ANY TIME BEFORE THEY ARE
ACCEPTED FOR PAYMENT. If you have any questions, including how to withdraw a
tender, please contact our information agent, MacKenzie Partners, at
1-800-322-2885 toll-free 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,
/s/ Oliver G. Richard III
OLIVER G. RICHARD III
Chairman, President
and Chief Executive Officer
IF YOU HAVE ANY QUESTIONS PLEASE CONTACT:
[LOGO]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
<PAGE>
News Release
[LOGO]
---------------------------------------------
For Immediate Release CONTACTS:
October 24, 1999 COLUMBIA ENERGY GROUP
Thomas L. Hughes (Financial Community)
703/561-6001
R. A. Rankin, Jr. (News Media)
703/561-6044
KEKST AND COMPANY
Michael Freitag (News Media)
212/521-4800
COLUMBIA ENERGY GROUP REJECTS INADEQUATE NISOURCE PROPOSAL;
WILL EXPLORE STRATEGIC ALTERNATIVES TO ENHANCE VALUE
HERNDON, Va., Oct. 24 -- Columbia Energy Group announced today that its
board of directors has unanimously rejected the latest unsolicited offer from
NiSource Inc. and authorized Columbia's management to explore strategic
alternatives.
The board determined that the revised cash tender offer by NiSource for all
of Columbia's outstanding common stock for $74 per share is inadequate and not
in the best interests of the company or its shareholders. Accordingly, the board
strongly recommends that Columbia's shareholders not tender their shares to
NiSource. The tender offer is currently scheduled to expire on Nov. 12, 1999.
The Columbia board's determination that NiSource's latest unsolicited offer
is inadequate is based, in part, on written opinions from Morgan Stanley Dean
Witter and Salomon Smith Barney Inc. In addition to the financial inadequacy of
the offer, the board continues to be concerned about the significant conditions
and serious regulatory hurdles associated with the NiSource proposal.
In recognition of the current business environment and many opportunities
available in the rapidly evolving energy industry, the board has authorized
management and its advisors to explore and evaluate a number of strategic
alternatives to generate value in excess of that which the company's business
plan or the NiSource proposal could create. As part of this process, Columbia
will initiate discussions with third parties regarding possible transactions,
including a merger, reorganization, or the disposition of a material amount of
assets. The company noted there can be no assurance that these discussions will
result in a transaction or any other action.
Oliver G. Richard III, Columbia's chairman, president and chief executive
officer, said: "This is a time of tremendous change in the energy services
industry. For creative, forward-looking companies like Columbia, it is a time of
promising opportunities, but also of challenges. Consequently, our board and
management are firmly committed to exploring thoroughly the opportunities
available to us and considering all possible alternatives for enhancing
shareholder value."
Richard today sent the following letter to Gary Neale, chairman, president
and chief executive officer of NiSource Inc.:
Dear Gary:
This letter is in response to NiSource's tender offer for all of Columbia's
outstanding shares at a revised cash price per share of $74 (the "Revised
Offer"). Columbia's Board carefully considered the Revised Offer with the
assistance of its financial and legal advisors. After careful deliberation,
Columbia's Board has unanimously determined that the Revised Offer is inadequate
and not in the best interests of Columbia or its shareholders. Accordingly, the
Columbia Board is strongly recommending to Columbia shareholders that they not
tender their shares into the Revised Offer.
<PAGE>
In making its determination, Columbia's Board took into account several
factors. These factors include the written opinions of Morgan Stanley Dean
Witter and Salomon Smith Barney Inc. that the Revised Offer was inadequate from
a financial point of view to the company's shareholders and the significant
conditions and serious regulatory hurdles associated with the Revised Offer.
Notwithstanding this determination, the Board recognizes the rapid change
taking place in the energy industry and the resulting need for a timely
evaluation of all strategic alternatives available to Columbia. The Board has
therefore determined that it is in the best interests of Columbia and its
shareholders to authorize management -- with the advice and assistance of
Columbia's financial and legal advisors -- to explore and evaluate a number of
strategic alternatives to generate shareholder value greater than that which
Columbia's business plan or the Revised Offer can create.
As part of this process, we will initiate discussions with third parties --
including NiSource, if it is interested -- regarding possible transactions
designed to significantly enhance value for our shareholders. We intend to
consider a variety of strategic alternatives, including an extraordinary
transaction, such as a merger, reorganization or the disposition by Columbia of
a material amount of assets. Of course, there can be no assurance that this
process will result in any such transaction.
We continue to have serious questions about the strategic and financial
merits of a combination of our two companies, as well as about NiSource's
ability to satisfy the conditions of its financing commitments and successfully
complete a transaction of the magnitude required. Nonetheless, be assured that
we will attempt to accommodate NiSource's participation in this process.
This is a time of tremendous change and exciting opportunities in the
rapidly deregulating energy industry. I believe the action taken by Columbia's
Board will enable both of our companies to move beyond the litigation and other
disruptive and counterproductive activities of the past four months, and to
pursue initiatives that are in the best interests of our shareholders,
employees, customers and the communities we serve.
Sincerely,
Oliver G. Richard III
Columbia Energy Group, based in Herndon, Va., is one of the nation's leading
energy services companies, with assets of approximately $7 billion. Its
operating companies engage in all phases of the natural gas business, including
exploration and production, transmission, storage and distribution, as well as
retail energy marketing, propane and petroleum product sales, and electric power
generation. Information about Columbia Energy Group (NYSE:CG) is available on
the Internet at WWW.COLUMBIAENERGYGROUP.COM.
# # #
2
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MORGAN STANLEY DEAN WITTER
October 22, 1999
Board of Directors
Columbia Energy Group
13880 Dulles Corner Lane
Herdon, VA 20171-4600
Members of the Board:
We understand that on October 18, 1999, CEG Acquisition Corp.
("Subsidiary"), a wholly owned subsidiary of NiSource Inc. ("Bidder"), amended
and supplemented its tender offer to purchase all outstanding shares of Common
Stock, par value $0.01 per share (the "Common Stock"), of Columbia Energy Group
("Target" or the "Company"), other than shares of Common Stock owned by the
Bidder and its affiliates, at a price of $74.00 per share net to the seller in
cash upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated June 25, 1999, as amended as of October 18, 1999 (the "Offer to
Purchase") and the related Letter of Transmittal (which together constitute the
"Bidder Offer"). The terms of the Bidder Offer are more fully set forth in the
Schedule 14D-1, as amended and supplemented as of October 18, 1999 (the
"Schedule 14D-1") filed by Subsidiary and Bidder with the Securities and
Exchange Commission on June 25, 1999.
You have asked for our opinion as to whether the Bidder Offer is adequate
from a financial point of view to the holders of Common Stock other than Bidder
and its affiliates.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company;
(ii) reviewed certain internal financial statements and other financial and
operating date concerning the Company prepared by the management of the
Company;
(iii) analyzed certain financial projections prepared by the management of
the Company;
(iv) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(v) reviewed the reported prices and trading activity for the Common Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii)reviewed the Offer to Purchase, the Schedule 14D-1 and certain related
documents;
(ix) reviewed a report from the Ryder Scott Company dated January 27, 1999,
regarding the reserves, future production and income attributable to
certain leasehold and royalty interests of Columbia Natural Resources
Corporation (the "Ryder Scott Report"); and
(x) performed such other analyses and considered such other factors as we
have deemed appropriate.
<PAGE>
MORGAN STANLEY DEAN WITTER
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposed of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company nor have we been furnished with any such
appraisals; however, we have reviewed the Ryder Scott Report and have relied
without independnt verification upon such report for purposes of this opinion.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with an analysis of the Offer to Purchase and the Bidder Offer,
and will receive a fee for our services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without prior
written consent, except that this opinion may be included in its entirety in any
filing made by the Company in respect of the Bidder Offer with the Securities
and Exchange Commission. This opinion is not intended to be and shall not
constitute a recommendation to any holder of Common Stock as to whether to
tender shares of Common Stock pursuant to the Bidder Offer.
Based on the foregoing, we are of the opinion on the date hereof that the
Bidder Offer is inadequate from a financial point of view to the holders of
Common Stock other than Bidder and its affiliates.
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Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
-----------------------------------------
Daniel B. More
MANAGING DIRECTOR
</TABLE>
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[LOGO]
October 22, 1999
Board of Directors
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, VA
Ladies and Gentlemen:
You have requested our opinion as to the adequacy, from a financial point of
view, to the holders of common stock, par value $0.01 per share ("Company Common
Stock"), of Columbia Energy Group (the "Company") of the tender offer of CEG
Acquisition Corp. ("Subsidiary"), a wholly owned subsidiary of NiSource Inc.
("NI"), to purchase all of the issued and outstanding shares of Company Common
Stock, other than shares of Company Common Stock owned by NI and its affiliates,
for $74 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, as amended and supplemented as of October 18, 1999 (the "Offer to
Purchase"), and the related Letter of Transmittal (which together with the Offer
to Purchase constitutes the "Offer"). The terms of the Offer are more fully set
forth in the Schedule 14D-1, as amended and supplemented as of October 18, 1999
(the "Schedule 14D-1"), filed by Subsidiary and NI with the Securities and
Exchange Commission on June 25, 1999.
In connection with rendering our opinion, we have reviewed and analyzed, among
other things, the following; (i) certain publicly available information
concerning the Company; (ii) certain internal information, primarily financial
in nature, including projections, concerning the business and operations of the
Company, furnished to us by the Company for purposes of our analysis; (iii)
certain publicly available information concerning the trading of, and the
trading market for, Company Common Stock; (iv) certain publicly available
information concerning NI; (v) certain publicly available information with
respect to certain other companies that we believe to be comparable to the
Company and the trading markets for certain of such other companies' securities;
(vi) the Offer to Purchase and the Schedule 14D-1; and (vii) a report from the
Ryder Scott Company dated January 27, 1999 regarding the reserves, future
production and income and certain leasehold and royalty interests of Columbia
Natural Resources Corporation (the "Ryder Scott Report"); and (viii) certain
publicly available information concerning the nature and terms of
<PAGE>
[LOGO]
Columbia Energy Group
October 22, 1999
Page 2
certain other transactions that we consider relevant to our inquiry. We further
have considered such other information, financial studies, analyses,
investigations and financial, economic and market criteria that we deemed
relevant. We also have met with certain officers and employees of the Company to
discuss the forgoing as well as other matters that we believe relevant to our
inquiry.
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have neither attempted
independently to verify nor assumed any responsibility for verifying any of such
information and have further relied upon the assurances of management of the
Company that they are not aware of any facts that would make any of such
information inaccurate or misleading. We have not conducted a physical
inspection of any of the properties or facilities of the Company, nor have we
made or obtained or assumed any responsibility for making or obtaining any
independent evaluations or appraisals of any of such properties or facilities,
nor have we been furnished with any such valuations or appraisals; however, we
have reviewed the Ryder Scott Report and have relied without independent
verification upon such report for purposes of this opinion. With respect to
financial projections, we have been advised by the management of the Company and
have assumed that they were reasonably prepared and reflect the best currently
available estimates and judgment of the management of the Company as to the
future financial performance of the Company and we express no view with respect
to such projections or the assumptions on which they were based.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial position and results of operations of the
Company; (ii) the business prospects of the Company; (iii) the historical and
current market for company Common Stock and for the equity securities of certain
other companies that we believe to be comparable to the Company; and (iv) the
nature and terms of certain other merger transactions that we believe to be
relevant. We have also taken into account our assessment of general economic,
market and financial conditions as well as our experience in connection with
similar transactions and securities valuation generally. Our opinion necessarily
is based upon conditions as they exist and can be evaluated on the date hereof,
and we assume no responsibility to update or revise our opinion based upon
circumstances or events occurring after the date hereof. Our
<PAGE>
[LOGO]
Columbia Energy Group
October 22, 1999
Page 3
opinion is, in any event, limited to the adequacy, from a financial point of
view, of the Offer to the holders of Company Common Stock. Our opinion is not
intended to be and shall not constitute a recommendation to any holder of
Company Common Stock as to whether to tender shares of Company Common Stock
pursuant to the Offer.
We have acted as financial advisor to the Company in connection with the Offer
and will receive a fee for such services. In addition, in the ordinary course of
business, we and our affiliates may actively trade the securities of the Company
and NI for our own account and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities. We and our
affiliates (including Citigroup Inc.) may have other business relationships with
the Company or NI.
This opinion is intended solely for the benefit and use of the Company
(including the management and directors of the Company) in considering the
transaction to which it relates and may not be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose, without the prior written consent of Salomon Smith Barney.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Offer is inadequate, from a financial point of view, to the holders
of Company Common Stock, other than NI and its affiliates.
Very truly yours,
/s/ Salomon Smith Barney Inc.
Salomon Smith Barney Inc.
