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Columbia Energy Group
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Filed by Columbia Energy Group
Pursuant to Rule 14a-12 of the Securities Exchange Act of 1934
Subject Company: Columbia Energy Group
Commission File No. 001-01098
NISOURCE AND COLUMBIA ENERGY GROUP AGREE TO COMBINATION
CREATES LEADING GAS COMPETITOR WITHIN KEY ENERGY CORRIDOR
MERRILLVILLE, IN AND HERNDON, VA (FEBRUARY 28, 2000) - NiSource Inc. (NYSE:NI)
and Columbia Energy Group (NYSE:CG) today announced that the boards of directors
of both companies have approved a definitive merger agreement under which
NiSource will acquire all of the outstanding shares of Columbia in a transaction
which values Columbia's common equity at approximately $6.0 billion. NiSource
will also assume approximately $2.5 billion in Columbia long-term debt. Based
upon the closing market price for NiSource on February 25, 2000, the combined
company would have an enterprise value of approximately $13.7 billion.
Upon completion of the transaction, Columbia Energy Group and NiSource will
become wholly owned subsidiaries of a new holding company. The transaction will
be accounted for as a purchase and is expected to be dilutive to NiSource's
earnings per share in the first year after the close of the combination
primarily due to transaction costs and other one-time charges and accretive
thereafter.
With assets stretching from the Gulf of Mexico, through the Midwest to the
Northeast, the combined company will have a powerful platform, with access to
30% of the U.S. population and 40% of U.S. energy consumption. The company will
have over 4.1 million gas, electric, water and propane customers located
primarily in nine states. It will:
o Be the largest gas company east of the Rockies, based on customers
o Have the nation's second largest volume of gas sales with 911 million cubic
feet per day
o Have the most gas storage with 700 billion cubic feet of capacity
TERMS:
Under the agreement, Columbia Energy Group shareholders will receive, for each
Columbia Energy Group share of common stock, $70 in cash plus a $2.60 face value
SAILS(SM) (a unit consisting of a zero coupon debt security with a forward
equity contract). Columbia shareholders also have the option to elect to receive
(in lieu of cash and SAILS(SM)) new holding company stock in a tax-free
exchange, for up to 30% of the outstanding Columbia Energy Group shares. Under
the common stock option, each Columbia Energy share will be exchanged for $74 in
new holding company stock subject to a collar such that, if the average NiSource
share price during the 30 days prior to the closing of the transaction is
greater than $16.50, Columbia shareholders will receive shares of new holding
company stock valued at $74 for each Columbia Energy Group share; if the average
NiSource share price during the 30 days prior to closing of the transaction is
$16.50 or below, Columbia shareholders will receive 4.4848 shares of new holding
company stock for each Columbia Energy Group share.
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Gary L. Neale, chairman, president and chief executive officer of NiSource,
said, "This combination creates the leading gas competitor within the key energy
corridor between the Gulf Coast and the Northeast. It will be a super-regional
energy company with complementary market areas and no asset overlap. Scale and
geography are critical to success in the evolving competitive energy industry,
and we will have the size and scope necessary to compete and win. Our strategic
location and breadth of assets will give us the ability to arbitrage BTUs across
time, weather, geography and supply. Consumer choice, efficiency, and new
products and services such as distributed generation make this transaction
extremely compelling for our shareholders, customers, employees and the
communities we serve.
"The transaction structure is designed to provide Columbia Energy Group
shareholders with the certainty of a cash offer, while also recognizing the
opportunity to share, on a tax-free basis, in the significant future value
created by this super-regional combination. Shareholders in the combined company
can expect significant growth in earnings per share on a going forward basis,"
continued Mr. Neale.
"Our success in building our business has been predicated upon fully utilizing
the skills and experience of the management team and employees present within
the companies with which we have merged. We are encouraged by the similarities
in our corporate cultures and expect a smooth integration of our two companies.
We have been impressed with the quality of Columbia's management team. We
anticipate retaining key management personnel from each of the critical
operating units and maintaining the headquarters for those businesses in their
current locations," Mr. Neale concluded.
Oliver G. Richard III, chairman, president and chief executive officer of
Columbia Energy Group, said, "Our Board of Directors and senior management fully
support this transaction, which we have determined is in the best interest of
Columbia and its shareholders. The Board reached this conclusion after a
comprehensive evaluation of strategic alternatives to generate value greater
than that which Columbia's business plan could create. We believe this merger
with NiSource not only meets our objective of delivering superior value to
Columbia's shareholders, but provides an opportunity for our shareholders and
employees to participate in the growth of the combined entity. We are firmly
committed to helping to achieve a rapid and seamless integration of our two
companies."
CONDITIONS:
The merger is conditioned upon, among other things, the approvals of the
shareholders of both companies and various regulatory commissions. However, if
the NiSource shareholder approval is not obtained, the transaction will
automatically be restructured so that Columbia Energy Group shareholders will
receive $70 in cash plus a $3.02 face value SAILS(SM) unit of NiSource with no
option for Columbia shareholders to elect new holding company stock. The
transaction is not subject to financing. NiSource has obtained a commitment from
Credit Suisse First Boston and Barclays Bank Plc for a bank facility in an
amount sufficient to finance the cash portion of the purchase price. It should
be noted that the Federal Trade Commission raised no objection to a previously
proposed NiSource transaction with Columbia Energy Group. NiSource intends to
register as a holding company with the Securities and Exchange Commission under
the Public Utility Holding Company Act. NiSource and Columbia anticipate that
the transaction can be completed by the end of 2000.
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Credit Suisse First Boston and Wasserstein Perella & Company, Inc. acted as
financial advisors, and Schiff Hardin & Waite, Simpson Thacher & Bartlett and
Dewey Ballantine acted as legal counsel to NiSource. Morgan Stanley Dean Witter
and Salomon Smith Barney acted as financial advisors, and Sullivan & Cromwell
acted as legal counsel to Columbia Energy Group.
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 virtually 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 -
news) is available on the Internet at www.columbiaenergygroup.com.
NiSource Inc. is a holding company whose primary business is the distribution of
electricity, natural gas and water in the Midwest and Northeast United States.
The company also markets utility services and customer-focused resource
solutions along a corridor stretching from Texas to Maine. Further information
about the company may be found on the Internet at http://www.nisource.com.
This press release contains certain forward-looking statements within
the meaning of the federal securities laws; these forward-looking
statements are subject to various risks and uncertainties. The factors
that could cause actual results to differ materially from the
projections, forecasts, estimates and expectations discussed herein may
include factors that are beyond the companies' ability to control or
estimate precisely, such as estimates of future market conditions, the
behavior of other market participants and the actions of the Federal
and State regulators. Other factors include, but are not limited to,
actions in the financial markets, weather conditions, economic
conditions in the two companies' service territories, fluctuations in
energy-related commodity prices, conversion activity, other marketing
efforts and other uncertainties. Other risk factors are detailed from
time to time in the two companies' SEC reports. Readers are cautioned
not to place undue reliance on these forward-looking statements, which
speak only as of the date of this press release. The companies do not
undertake any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the
date of this press release.
NiSource and the new holding company will be filing a registration
statement, which will contain a joint proxy statement/prospectus of
NiSource and Columbia Energy, and other documents with the Securities
and Exchange Commission. Investors and security holders are urged to
read the joint proxy statement/prospectus and any other relevant
documents filed with the SEC when they become available because they
will contain important information. Investors and security holders will
be able to receive the joint proxy statement/prospectus and other
documents free of charge at the SEC's web site, www.sec.gov, from
NiSource Investor Relations at 801 East 86th Avenue, Merrillville,
Indiana 46410 or from Columbia Investor Relations at 13880 Dulles
Corner Lane, Herndon, Virginia 20171.
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Note to Editors: Today's news release, along with other news about NiSource and
Columbia Energy Group is available on the Internet at www.nisource.com and
www.columbiaenergygroup.com.
CONTACTS FOR NISOURCE: CONTACTS FOR COLUMBIA:
MEDIA: MEDIA:
Maria Hibbs R.A. Rankin, Jr.
(219) 647-6201 (703) 561-6044
INVESTORS: Michael Freitag
Dennis Senchak / Rae Kozlowski Kekst & Co.
(219) 647-6085/(219) 647-6083 (212) 521-4896
Barrett Godsey / Joele Frank INVESTORS:
Joele Frank, Wilkinson Brimmer Katcher Thomas Hughes
(212) 355-4449 (703) 561-6001
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