SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
April 24, 2000
COLUMBIA ENERGY GROUP
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE 001-01098 131594808
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, Virginia 20171
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 561-6000
N/A
(Former name or former address, if changed since last report)
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Items 1 - 4. Not Applicable.
Item 5. Other Events.
Columbia Energy Group ("CEG") has scheduled a special meeting for its
stockholders to be held at the PNC Bank Center, 222 Delaware Avenue, Wilmington,
Delaware, on Friday, June 2, 2000, at 2:00 p.m., local time, to consider and
vote on a proposal to adopt a merger agreement in connection with CEG's proposed
merger with NiSource Inc. ("NiSource").
Each of Morgan Stanley & Co. Incorporated ("Morgan Stanley") and
Salomon Smith Barney Inc. ("Salomon Smith Barney") has delivered an opinion to
the Board of Directors of CEG, dated as of April 24, 2000, reconfirming its
opinion dated as of February 27, 2000, which states that the consideration to be
received by the CEG stockholders in connection with the proposed merger with
NiSource is fair, from a financial point of view, to such stockholders. In
reconfirming its opinion, each of Morgan Stanley and Salomon Smith Barney
employed analyses substantially similar to those employed in rendering its
opinion dated February 27, 2000, and included in the joint proxy
statement/prospectus of CEG and NiSource dated as of April 24, 2000. The opinion
of each of Morgan Stanley and Salomon Smith Barney is subject to the
considerations set forth therein. Copies of the opinions dated as of April 24,
2000 are set forth as Exhibits 99(a) and 99(b) hereto and each is hereby
incorporated by reference herein.
Item 6. Not Applicable.
Item 7(a)-(b). Not Applicable.
Item 7(c). Exhibits.
99(a) Opinion, dated April 24, 2000, from Morgan Stanley & Co. Incorporated to
Columbia Energy Group.
99(b) Opinion, dated April 24, 2000, from Salomon Smith Barney Inc. to Columbia
Energy Group.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COLUMBIA ENERGY GROUP
By: /s/ MICHAEL W. O'DONNELL
--------------------------------
Name: Michael W. O'Donnell
Title: Sr. Vice President and
Chief Financial Officer
Date: May 12, 2000
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Exhibit Index
99(a) Opinion, dated April 24, 2000, from Morgan Stanley & Co. Incorporated to
Columbia Energy Group.
99(b) Opinion, dated April 24, 2000, from Salomon Smith Barney Inc. to Columbia
Energy Group.
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Exhibit 99(a)
[Letterhead of Morgan Stanley]
April 24, 2000
Board of Directors
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, VA 20171-4600
Members of the Board:
We understand that Columbia Energy Group (the "Company") and Nisource
Inc.("Parent")have entered into an Agreement and Plan of Merger dated February
27, 2000 (the "Merger Agreement"). As more specifically set forth in the Merger
Agreement, and subject to the terms and conditions thereof, as promptly as
practicable following the execution of the Merger Agreement, Parent will cause
to be organized Parent Holdco ("Holdco"), which will be 100% owned by Parent,
and Holdco will cause to be organized Parent Acquisition Corp. ("PAC") and
Company Acquisition Corp. ("CAC"), each of which will be 100% owned by Holdco.
At the effective time, (A) PAC will merge with and into Parent (the
"Parent Merger") and each issued and outstanding common share, without par
value, of Parent (the "Parent Common Stock") (other than shares held in the
treasury of Parent or owned by any Subsidiary (as defined in the Merger
Agreement) of Parent, which shall be canceled) shall be converted into one share
of Holdco common stock, without par value (the "Holdco Common Stock") and (B)
CAC will merge with and into the Company (the "Company Merger" and, together
with the Parent Merger, the "Merger") and each issued and outstanding share of
Company Common Stock (other than Dissenting Shares (as defined in the Merger
Agreement), shares owned by Parent or any Subsidiary of Parent, which shall be
canceled, and shares held in the treasury of the Company or owned by any
Subsidiary of the Company, which shall be canceled (collectively, "Excluded
Shares")) shall be converted into the right to receive, at the election of the
holders of such shares, either (1) the sum of (x) $70 in cash, without interest,
plus (y) $2.60 in face value of Holdco SAILS security units having the terms set
forth in Annex A to the Merger Agreement, plus (z) the Additional Amount (as
defined below), if any (the "Cash and Units Consideration") or (2) a number, in
no event to be greater than 4.4848, of shares of Holdco Common Stock determined
by dividing $74 by the Average Parent Share Price (as defined in the Merger
Agreement), plus the Additional Amount, if any
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(the "Stock Consideration"). The "Additional Amount" means an amount in cash
equal to 7% interest on $72.29 for the period beginning on the first anniversary
of the Merger Agreement, and ending on the day prior to the closing of the
Merger (calculated on a per annum basis of a 365-day year) less all cash
dividends declared or paid on the Company Common Stock after the first
anniversary of the Merger Agreement; provided, however, that the Additional
Amount shall not be a negative number. The Merger Agreement provides that,
notwithstanding the elections of holders of shares of Company Common Stock, (i)
no greater than 30% of the outstanding shares of Company Common Stock will be
converted into the right to receive the Stock Consideration and (ii) if less
than 10% of the outstanding shares of Company Common Stock elect the Stock
Consideration, all shares of Company Common Stock will be converted into the
Cash and Units Consideration, provided that Parent SAILS security units will be
delivered in lieu of Holdco SAILS security units. Dissenting Shares shall not be
converted into the right to receive the Cash and Units Consideration, the Stock
Consideration or the Alternative Structure Merger Consideration, as the case may
be, unless and until the holder of such shares shall have failed to perfect or
shall have withdrawn or lost his right to appraisal and payment, as the case may
be, at which time such shares shall be deemed to have been converted into the
right to receive the Cash and Units Consideration, without any interest thereon.
Notwithstanding the foregoing, if Parent fails to obtain the necessary
shareholder approval to consummate the Parent Merger, (i) the Parent Merger will
not be consummated and (ii) at the effective time of the Company Merger, each
issued and outstanding share of Company Common Stock (other than Excluded
Shares) shall, in lieu of being converted as provided in the preceding
paragraph, be converted into the right to receive the sum of (x) $70 in cash,
without interest, plus (y) $3.02 in face value of Parent SAILS security units
having the terms set forth in Annex A to the Merger Agreement, plus (z) the
Additional Amount, if any (the "Alternative Structure Merger Consideration" and,
together with the Cash and Units Consideration and the Stock Consideration, the
"Consideration").
You have asked for our opinion as to whether the Consideration to be
received by the holders of Company Common Stock pursuant to the Merger Agreement
is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
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3
(i) reviewed certain publicly available financial statements and other
information of the Company and Parent;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company and Parent prepared by
the management of the Company and Parent, respectively;
(iii) reviewed and analyzed certain financial projections prepared by the
management of the Company and Parent;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company and Parent, including the
strategic rationale for the Merger and the information relating to
certain strategic, financial and operational benefits anticipated
from the Merger with senior executives of the Company and Parent,
respectively;
(v) reviewed the pro forma impact of the Merger on Parent's earnings
per share and considered the impact of the Merger on Parent's
consolidated capitalization and financial ratios;
(vi) reviewed the reported prices and trading activity for the Company
Common Stock and the Parent Common Stock;
(vii) compared the financial performance of the Company and Parent and
the prices and trading activity of the Company Common Stock and the
Parent Common Stock with that of certain other comparable
publicly-traded companies and their securities;
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(ix) participated in discussions and negotiations among representatives
of the Company and Parent and their financial and legal advisors;
(x) reviewed the Merger Agreement and certain related documents; and
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4
(xi) performed such other analyses and considered such factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, and information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, 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 and Parent. In addition, we have
assumed that the Merger will be consummated in accordance with the terms set
forth in the Merger Agreement. 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. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We note that we are not legal or regulatory experts and have relied
upon, without independent verification, the assessment of the Company's legal
and regulatory advisors with respect to the legal and regulatory matters related
to the Merger.
In arriving at our opinion, we were authorized to solicit, and did
solicit, interest from numerous parties with respect to an acquisition, business
combination or other extraordinary transaction involving the Company.
We have acted as financial advisor to the Board of Directors of the
Company in connection with this transaction and will receive a fee for our
services. In the past, Morgan, Stanley & Co. Incorporated and its affiliates
have provided financial advisory and financing services for the Company and
Parent and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board
of Directors of the Company, except that this opinion may be included in its
entirety in any filing made by the Company in respect of the transaction with
the Securities and Exchange Commission. In addition, this opinion does not in
any manner address the prices at which the Holdco Common Stock or the SAILS
security units of Holdco or Parent, as the case may be, will trade following
consummation of the Merger and Morgan Stanley expresses no opinion or
recommendation as to how the shareholders of the
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5
Company should vote at the shareholders meeting held in connection with the
Merger.
Based upon and subject to the foregoing, we are of the opinion on the
date hereof that the Consideration to be received by the holders of Company
Common Shares pursuant to the Merger Agreement is fair from a financial point of
view to such holders.
Very truly yours,
MORGAN STANLEY & CO.
INCORPORATED
By: /s/ Daniel B. More
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Daniel B. More
Managing Director
Exhibit 99(b)
[Letterhead of Salomon Smith Barney]
April 24, 2000
Board of Directors
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, VA 20171-4600
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial
point of view, to the holders of shares of the common stock, par value $0.01 per
share ("Company Common Stock"), of Columbia Energy Group (the "Company") of the
consideration to be received by such holders in connection with the proposed
merger contemplated by the Agreement and Plan of Merger (the "Agreement"), dated
as of February 27, 2000, between the Company and Nisource Inc. ("Parent").
As more specifically set forth in the Agreement, and subject to the
terms and conditions thereof, (i) as promptly as practicable following the
execution of the Agreement, Parent will cause to be organized Parent Holdco
("Holdco"), which will be 100% owned by Parent, and Holdco will cause to be
organized Parent Acquisition Corp. ("PAC") and Company Acquisition Corp.
("CAC"), each of which will be 100% owned by Holdco.
At the effective time, (A) PAC will merge with and into Parent (the
"Parent Merger") and each issued and outstanding common share, without par
value, of Parent (the "Parent Common Stock") (other than shares held in the
treasury of Parent or owned by any Subsidiary (as defined in the Agreement) of
Parent, which shall be canceled) shall be converted into one share of Holdco
common stock, without par value (the "Holdco Common Stock") and (B) CAC will
merge with and into the Company (the "Company Merger" and, together with the
Parent Merger, the "Merger") and each issued and outstanding share of Company
Common Stock (other than Dissenting Shares (as defined in the Agreement), shares
owned by Parent or any Subsidiary of Parent, which shall be canceled, and shares
held in the treasury of the Company or owned by any Subsidiary of the Company,
which shall be canceled (collectively, "Excluded Shares")) shall be
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converted into the right to receive, at the election of the holders of such
shares, either (1) the sum of (x) $70 in cash, without interest, plus (y) $2.60
in face value of Holdco SAILS security units having the terms set forth in Annex
A to the Agreement, plus (z) the Additional Amount (as defined below), if any
(the "Cash and Units Consideration") or (2) a number, in no event to be greater
than 4.4848, of shares of Holdco Common Stock determined by dividing $74 by the
Average Parent Share Price (as defined in the Agreement), plus the Additional
Amount, if any (the "Stock Consideration"). The "Additional Amount" means an
amount in cash equal to 7% interest on $72.29 for the period beginning on the
first anniversary of the Agreement, and ending on the day prior to the closing
of the Merger (calculated on a per annum basis of a 365-day year) less all cash
dividends paid on the Company Common Stock with respect to a record date
occurring after the first anniversary of the Agreement; provided, however, that
the Additional Amount shall not be a negative number. The Agreement provides
that, notwithstanding the elections of holders of shares of Company Common
Stock, (i) no greater than 30% of the outstanding shares of Company Common Stock
will be converted into the right to receive the Stock Consideration and (ii) if
less than 10% of the outstanding shares of Company Common Stock elect the Stock
Consideration, all shares of Company Common Stock will be converted into the
Cash and Units Consideration, provided that Parent SAILS security units will be
delivered in lieu of Holdco SAILS security units. Dissenting Shares shall not be
converted into the right to receive the Cash and Units Consideration, the Stock
Consideration or the Alternative Structure Merger Consideration, as the case may
be, unless and until the holder of such shares shall have failed to perfect or
shall have withdrawn or lost his right to appraisal and payment, as the case may
be, at which time such shares shall be deemed to have been converted into the
right to receive the Cash and Units Consideration, without any interest thereon.
Notwithstanding the foregoing, if Parent fails to obtain the necessary
shareholder approvals to consummate the Parent Merger, (i) the Parent Merger
will not be consummated and (ii) at the effective time of the Company Merger,
each issued and outstanding share of Company Common Stock (other than Excluded
Shares) shall, in lieu of being converted as provided in the preceding
paragraph, be converted into the right to receive the sum of (x) $70 in cash,
without interest, plus (y) $3.02 in face value of Parent SAILS security units
having the terms set forth in Annex A to the Merger Agreement, plus (z) the
Additional Amount, if any (the "Alternative Structure Merger Consideration" and,
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together with the Cash and Units Consideration and the Stock Consideration, the
"Merger Consideration").
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 Parent; (v) certain internal information,
primarily financial in nature, including projections, concerning the business
and operations of the Parent, furnished to us by the Parent for purposes of our
analysis; (vi) certain publicly available information concerning the trading of,
and the trading market for, Parent Common Stock; (vii) certain publicly
available information with respect to certain other companies that we believe to
be comparable to the Company or Parent and the trading markets for certain of
such other companies' securities; and (viii) certain publicly available
information concerning the nature and terms of 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 foregoing 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 or
Parent, 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.
With respect to financial projections, we have been advised by the managements
of the Company and Parent and have assumed that they were reasonably prepared
and reflect the best currently
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4
available estimates and judgment of the managements of the Company and Parent as
to the future financial performance of the Company and Parent, respectively, 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 and Parent; (ii) the business prospects of the Company and Parent; (iii)
the historical and current market for Company Common Stock, Parent Common Stock
and for the equity securities of certain other companies that we believe to be
comparable to the Company or Parent; 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. This opinion does not in any manner address the price at
which the Holdco Common Stock or the SAILS security units of Holdco or Parent,
as the case may be, will trade following the Merger. 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 opinion is, in any
event, limited to the fairness, from a financial point of view, of the Merger
Consideration to the holders of the Company Common Stock and does not constitute
a recommendation as to how holders of Company Common Stock should vote with
respect to the Merger or the transactions contemplated thereby.
We have acted as financial advisors to the Company in connection with
the Merger and will receive a fee for such services, a substantial portion of
which is contingent upon consummation of the Merger. In addition, in the
ordinary course business, we and our affiliates may actively trade the
securities of the Company and Parent 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 Parent.
This opinion is intended solely for the benefit and use 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 (other than
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5
in the Agreement) at any time, in any manner or for any purpose, without the
prior written consent of Salomon Smith Barney, except that this opinion may be
reproduced in full in any filing made by the Company with respect to the Merger
with the Securities and Exchange Commission.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Merger Consideration is fair, from a financial point of
view, to the holders of the Company Common Stock.
Very truly yours,
/s/Salomon Smith Barney
SALOMON SMITH BARNEY
