Filed by: NiSource Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Columbia Energy Group
Registration Statement File No: 333-33896
On May 9, 2000, NiSource distributed the "New Directions" newsletter
to its employees. The newsletter included news and information on
NiSource's merger with Columbia. The text of the newsletter is set forth
below.
TEXT OF "NEW DIRECTIONS" EMPLOYEE NEWSLETTER
MAY 9, 2000
May 9, 2000 Vol. 1 No. 2
----------------------------------------------------------------------
NEW DIRECTION [COMPASS LOGO]
PROJECT COMPASS SETS NEW DIRECTION
----------------------------------
Most companies involved in mergers call the team assigned to
integrate the two companies the 'transition team" or "merger
integration team."
But in an industry that is rapidly changing, Columbia and
NiSource decided that their team's name should better represent their
commitment to build a new NiSource -- agile and ready to compete and
succeed in this evolving energy marketplace. NiSource and Columbia
have chosen COMPASS as that symbol.
The compass symbol is now part of the NEW DIRECTION logo,
representing the standard set by the team of employees from Columbia
and NiSource who will bring the two companies together.
The new NiSource will have new capabilities -- new ways of doing
things that will deliver value to the company's shareholders,
employees, customers and communities. As the logo demonstrates, the
team will look at possibilities, but ground them in reality. It will
reach for new ideas and make the hard choices necessary to implement
company strategy.
Taking its cues from NiSource Chairman, President and Chief
Executive Officer Gary Neale and the senior management of both
companies, Project Compass will set the direction and define the new
NiSource.
[Compass Logo]
Possibility - Reach - Reality - Choice
New Direction
NISOURCE, COLUMBIA LAUNCH PROJECT COMPASS
-----------------------------------------
Mark Wyckoff, NiSource vice president, Human Resources, has been
named to lead Project Compass, the process of integrating Columbia
Energy Group and NiSource. Steve Smith, Columbia Energy Group Service
Corporation senior vice president and deputy chief financial officer,
will serve as point person for CEG.
The definition of success for Project Compass is that by the
close of the transaction, all employees will know what their jobs will
be, whom they report to and what role they will play in achieving the
company's strategic goals.
Project Compass' mission will focus on three areas:
* Guided by NiSource's commitments to the financial community,
aggressively reduce costs and deliver value to the bottom line.
* Driven by the NiSource strategy, position and build the
organization of the future.
* Support the initial steps in a process of cultural change.
The team's first step will be to develop detailed goals to
support each of these areas.
Project Compass is divided into three phases during the next
seven months:
* Opportunity Identification
* Conceptual Design
* Detailed Design.
Right now, pre-project preparation is under way. Through May 15,
the team is defining a process to manage the project, addressing all
administrative issues and establishing office space in Merrillville,
Indiana. In addition to developing the program management function,
pre-project preparation involves:
* Defining the project organizational structure
* Identifying staffing requirements
* Creating a detailed work plan to ensure all priority issues are
identified
* Collecting and validating baseline data about NiSource and
Columbia
* Establishing formal goals for the merger integration process.
This week employees from both companies will be identified to
participate on various teams. The teams will gather for a kick-off
session in Merrillville the week of May 15.
OPPORTUNITY IDENTIFICATION
Phase One, Opportunity Identification, begins on May 15 and will
last for six weeks. The first goal during this phase is to identify
and quantify the opportunities that will be pursued to achieve the
targeted cost savings. In addition, teams will identify items that
must be accomplished legally and operationally to run the combined
company (e.g., shareholder reporting) as of the date the transaction
closes.
Workteams created for this phase will perform several activities
including:
* Understanding the current NiSource and Columbia organization,
processes, procedures and systems (the "as is" organization)
* Identifying major cost drivers
* Reviewing best practices and benchmarks -- within and outside the
utility industry
* Identifying savings opportunities
* Prioritizing these opportunities
* Obtaining a high-level description of the changes that must be
made by the time the transaction closes.
CONCEPTUAL DESIGN
The Conceptual Design phase, which will begin on July 1 and last
approximately eight weeks, takes the approved initiatives from Phase
One, Opportunity Identification, to the next level of detail. This
includes designing the "TO BE" organization, processes and systems.
The workteams will also define and understand the "gaps" that may
exist between the "AS IS" and "TO BE" organizations.
In this phase, the team will also conduct a cost/benefit analysis
of the proposed changes, develop sequencing and timelines and identify
the potential interdependencies of various elements that might affect
implementation.
Throughout all phases of the project, employees from NiSource and
Columbia companies will work together on joint teams to meet Project
Compass goals.
DETAILED DESIGN
Phase Three, to begin in early September, will add detail to the
design of "TO BE" models and develop actual implementation plans.
CONSULTANTS ON BOARD
--------------------
When the merger of NiSource and Columbia Energy Group is
completed, the new NiSource will be a significant player not only in
the energy arena, but also among the nation's industrial companies.
Building such a company is no small task.
To provide merger integration support, NiSource has selected
Andersen Consulting to work with the two companies.
The consulting firm uses a disciplined approach that will provide
a template so that all of the teams work consistently to achieve the
integration goals.
According to Mark Wyckoff, NiSource vice president of Human
Resources and leader of Project Compass charged with directing the
integration, "Neither NiSource nor Columbia has ever done a
transaction of this size. Andersen's talent and breadth of experience
will be of great value as we go through this process."
Andersen staff is already on site at NiSource headquarters in
Merrillville, Indiana.
COLUMBIA GAS OF KENTUCKY FILES MERGER APPLICATION
-------------------------------------------------
On Monday, May 1, NiSource, Columbia Energy Group and Columbia
Gas of Kentucky filed a joint application with the Kentucky Public
Service Commission requesting the necessary approvals related to the
planned merger. Under Kentucky's statutes, the commission has 60 days
in which to review and rule on the proposed merger.
The combined company will be the largest natural gas distributor
east of the Rocky Mountains and the second largest gas company in the
country. Similar applications have been filed with the Pennsylvania
Public Utility Commission and the State Corporation Commission of the
Commonwealth of Virginia.
OHIO COMMISSION ACTION MOVES MERGER TOWARD COMPLETION
-----------------------------------------------------
Ohio regulators last week told the U.S. Securities and Exchange
Commission (SEC) that a NiSource-Columbia merger would have no impact
on the state's ability to protect the interests of Columbia Gas of
Ohio (COH) ratepayers.
In a letter to the SEC, the Public Utilities Commission of Ohio
(PUCO) also said it would continue to exercise jurisdiction over the
regulated activities of the Columbia natural gas utility after the
companies' proposed merger.
The PUCO action moves the NiSource-Columbia merger a step closer
to the expected completion of the transaction later this year.
The Ohio commission's staff and COH regulatory staff negotiated a
number of commitments by the utility, Columbia Energy Group and
NiSource, which furnished the basis of the commission action.
The commitments include:
* COH headquarters will remain at its present location in Columbus.
* The merging companies do not anticipate any material impact on
COH employment levels.
* The PUCO and its staff will have access to the books and records
of COH and other affiliates when relevant to the rates and
services of COH.
* The proposed merger leaves in place the COH rate freeze until
October 2004 that was negotiated earlier with a regulatory
collaborative and adopted by the PUCO.
COH is the largest natural gas utility in the state with more
than 1.3 million customers in 64 of Ohio's 88 counties. Still pending
are actions by several state public utility commissions and federal
agencies, as well as shareholder votes on the merger.
"We appreciate the Ohio commission's timely action and
consideration in addressing the merger," said Gary L. Neale, NiSource
chairman, president and CEO and Oliver G. Richard III, Columbia Energy
Group chairman, president and CEO, in a joint statement. "Consumer
service and value delivery have and will continue to be major goals of
the Columbia Gas distribution business."
"Columbia Energy Group and NiSource are proud of the record of
excellence in customer service that has been established by Columbia
Gas of Ohio," the Ohio utility stated in a commitment letter submitted
to the PUCO. The letter also said the merging companies are committed
to continuation of Columbia Gas of Ohio's robust Customer Choice
program and its collaborative process in working with the commission
on evolving issues in a competitive gas market.
The NiSource/Columbia Energy Group merger, announced Feb. 28,
will result in a combined company serving more than 4.1 million
customers primarily located in nine states. Its operations will span
the high-growth energy consumption corridor stretching from the Gulf
of Mexico to New England, creating the largest natural gas distributor
east of the Rocky Mountains.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* New Direction is produced by NiSource Corporate Communications *
* for all NiSource employees. Questions may be directed to *
* 219-647-6200. *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
The following is included to conform with federal regulations:
This publication 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 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 these stories.
In addition to other documents filed with the Securities and
Exchange Commission by the two companies, NiSource and the new
holding company have filed a registration statement, which
contains a joint proxy statement/prospectus for NiSource and
Columbia Energy. The final joint proxy statement/prospectus,
dated April 24, 2000, is available and has been distributed to
the companies' shareholders. 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 can 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 at its web site,
www.nisource.com, or from Columbia Investor Relations at 13880
Dulles Corner Lane, Herndon, Virginia 20171 or at its web site,
www.columbiaenergygroup.com.
Information concerning the identity of the participants in the
solicitation of proxies by the NiSource Inc. and Columbia Energy
Group boards of directors and their direct or indirect interests,
by security holdings or otherwise, may be obtained from the
Secretary of NiSource Inc. or the Secretary of Columbia Energy
Group, as the case may be, at the addresses listed above.
