<PAGE> 1
Rule 424(b)(5)
Registration Statement No. 33-51553
PROSPECTUS SUPPLEMENT
(To Prospectus Dated December 28, 1993) [LOGO]
650,000 SHARES
SOUTHEASTERN MICHIGAN GAS ENTERPRISES, INC.
COMMON STOCK
------------------------
The shares of Common Stock offered hereby are being offered by Southeastern
Michigan Gas
Enterprises, Inc.
------------------------
The Common Stock is traded in the over-the-counter market and quoted on the
NASDAQ National Market System under the symbol SMGS. On January 18, 1994,
the last reported sale price for the Common Stock on the NASDAQ
National Market System was $21.50 per share. See "Price
Range of Common Stock and Dividends."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE $20.50 $.80 $19.70
TOTAL(3) $13,325,000 $520,000 $12,805,000
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deduction of expenses payable by the Company estimated at $50,000.
(3) The Company has granted the Underwriter a 30-day option to purchase up to an
additional 97,500 shares to cover over-allotments, if any. If all such
shares are purchased, total price to public, underwriting discounts and
commissions and proceeds to Company will be $15,323,750, $598,000 and
$14,725,750, respectively.
------------------------
The shares of Common Stock are being offered by the Underwriter named below
when, as and if received and accepted by it, subject to its right to reject
orders in whole or in part and subject to certain other conditions. It is
expected that delivery of the shares will be made in New York, New York on or
about January 26, 1994.
------------------------
DEAN WITTER REYNOLDS INC.
January 19, 1994
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR SINCE THE DATES AS OF WHICH INFORMATION IS SET FORTH HEREIN. NEITHER
THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
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PAGE
----
<S> <C>
Prospectus Summary................................................................... S-3
Map of Service Territories........................................................... S-5
The Company.......................................................................... S-6
Recent Developments.................................................................. S-7
Use of Proceeds...................................................................... S-10
Capitalization....................................................................... S-10
Price Range of Common Stock and Dividends............................................ S-11
Underwriting......................................................................... S-12
PROSPECTUS
Available Information................................................................ 2
Incorporation of Certain Information by Reference.................................... 2
The Company.......................................................................... 3
Use of Proceeds...................................................................... 3
Description of Common Stock.......................................................... 3
Description of the Debentures........................................................ 5
Plan of Distribution................................................................. 7
Legal Opinions....................................................................... 8
Experts.............................................................................. 8
</TABLE>
S-2
<PAGE> 3
PROSPECTUS SUMMARY
This summary is qualified in its entirety by, and should be read in
conjunction with, the information appearing elsewhere in this Prospectus
Supplement and the accompanying Prospectus and in the documents, financial
statements and other information incorporated herein and therein by reference.
All per share amounts in this Prospectus Supplement have been adjusted to
reflect all stock dividends and stock splits through the Company's most recent
stock dividend paid on May 15, 1993.
THE COMPANY
Southeastern Michigan Gas Enterprises, Inc. (the "Company") was established
as a holding company in 1977. The Company is the parent company of six direct
subsidiaries. Substantially all of the Company's assets are invested in natural
gas operations which are subject to regulation by various regulatory bodies.
Weather has a significant impact on the Company's revenues.
NATURAL GAS DISTRIBUTION COMPANIES
-- Southeastern Michigan Gas Company ("Southeastern")
-- Michigan Gas Company ("Michigan Gas")
-- Battle Creek Gas Company ("Battle Creek")
Southeastern, Michigan Gas and Battle Creek (collectively, the "Utility
Subsidiaries") purchase, distribute and transport natural gas to approximately
210,000 customers in twenty-three counties in the lower and upper peninsulas of
Michigan. During the last four years, their combined customer base has grown at
an average rate of approximately 5,000 customers, or 2.5%, per year. In 1992,
the Utility Subsidiaries provided over 90% of consolidated net income.
SEMCO ENERGY SERVICES, INC.
SEMCO Energy Services, Inc. ("SEMCO") is a diversified company with
activities and investments in many segments of the natural gas industry. SEMCO
is primarily involved in natural gas marketing, gas transmission and gathering,
underground storage of natural gas and exploration and production of oil and
gas. Oil and gas exploration activities are expected to play a decreasing role
in the Company's future business plans.
SOUTHEASTERN DEVELOPMENT COMPANY
Southeastern Development Company ("SEDCO") is engaged in a residential real
estate project in Port Huron, Michigan. SEDCO is also engaged in a natural
gas-fired cogeneration operation through its 50% interest in a joint venture.
SOUTHEASTERN FINANCIAL SERVICES, INC.
Southeastern Financial Services, Inc. ("SFS") is engaged in leasing
equipment, specializing in motor vehicles, data processing equipment and natural
gas-fired equipment, primarily to companies of the consolidated group.
THE OFFERING
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<S> <C>
Common Stock Offered................. 650,000 shares(1)
Common Stock to be Outstanding after
the Offering (Approximately)....... 10,340,000 shares(1)
Common Stock Price Range: January 1,
1993 through January 18, 1994...... $17.38 - $25.75
NASDAQ/NMS Symbol.................... SMGS
Indicated Annual Dividend Rate....... $.80 per share, paid quarterly; it is anticipated
that purchasers of the shares of Common Stock offered
hereby who are holders of record of such shares on
February 4, 1994 will be entitled to a dividend of
$.20 per share payable on February 15, 1994.
Use of Proceeds...................... To pay down short-term debt incurred to finance the
ongoing construction program of the Utility
Subsidiaries and for general corporate purposes.
</TABLE>
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(1) Does not include an additional 97,500 shares subject to the Underwriter's
over-allotment option.
S-3
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SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE
YEAR ENDED DECEMBER 31, MONTHS ENDED
------------------------------------------------------------- SEPTEMBER 30,
1988 1989 1990 1991 1992 1993
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenue:
Gas sales revenue:
Residential................. $ 99,626 $ 105,112 $ 97,668 $ 101,542 $ 110,173 $ 117,222
Commercial.................. 47,377 50,304 47,811 49,100 53,770 57,949
Industrial.................. 21,931 18,741 16,633 15,139 14,953 15,501
Total gas sales revenue..... $ 168,934 $ 174,157 $ 162,112 $ 165,781 $ 178,896 $ 190,672
Other operating revenue:
Gas marketed................ $ 27,181 $ 35,399 $ 49,525 $ 48,497 $ 54,595 $ 67,032
Gas transported............. 11,866 12,199 10,945 11,736 11,918 11,937
Other....................... 5,902 4,998 5,757 5,508 6,117 6,391
Total other operating
revenue.................. $ 44,949 $ 52,596 $ 66,227 $ 65,741 $ 72,630 $ 85,360
Total operating revenue....... $ 213,883 $ 226,753 $ 228,339 $ 231,522 $ 251,526 $ 276,032
Operating income................ $ 15,722 $ 18,115 $ 16,304 $ 18,164 $ 19,974 $ 21,548
Net income available for common
stock before extraordinary
item.......................... 6,915 7,278 6,027 7,301 9,211 9,561
Net income available for common
stock(1)...................... 6,915 7,278 6,027 7,301 8,310 9,561
Earnings per share(2):
Before extraordinary item..... .86 .84 .68 .81 .99 1.01
Net income(1)................. .86 .84 .68 .81 .90 1.01
Cash dividends paid per
share(2)...................... .59 .64 .68 .70 .74 .77
Weighted average number of
shares outstanding(2)......... 8,014,000 8,634,000 8,824,000 9,037,000 9,274,000 9,460,000
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
------------------------
AS
ACTUAL ADJUSTED(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Total assets.................................................................. $321,940 $321,940
Short-term debt (includes current portion of long-term debt).................. 51,865 39,110
Long-term debt (less current portion)......................................... 101,031 101,031
Common stockholders' equity................................................... 81,214 93,969
Book value per share.......................................................... 8.48 9.19
Long-term debt to total capitalization(4)..................................... 54% 51%
</TABLE>
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(1) Reflects a 1992 loss on early extinguishment of debt of $901,000 (net of
tax).
(2) Adjusted to give effect to a four-for-three stock split in 1989 and five
percent stock dividends in May 1988, 1989, 1990, 1991, 1992 and 1993.
(3) Adjusted to give effect to the sale of 650,000 shares of Common Stock
offered hereby and the application of the net proceeds therefrom to reduce
short-term debt.
(4) Total capitalization consists of long-term debt (less current portion),
preferred stockholders' equity and common stockholders' equity.
S-4
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[MAP OF SERVICE TERRITORIES]
SEE APPENDIX A
S-5
<PAGE> 6
THE COMPANY
SOUTHEASTERN MICHIGAN GAS ENTERPRISES, INC.
The Company is a holding company formed in 1977 and has six direct
subsidiaries. The Company provides professional and technical services for its
subsidiaries in the areas of finance and accounting, taxes, risk management,
human resources, legal and information systems.
UTILITY SUBSIDIARIES
The Utility Subsidiaries generate revenues through the sale and
transportation of natural gas. Set forth in the table below are the sales and
transportation information for the years 1991 and 1992 and the twelve months
ended September 30, 1993:
<TABLE>
<CAPTION>
TWELVE
YEAR ENDED DECEMBER MONTHS ENDED
31, SEPTEMBER
-------------------- 30,
1991 1992 1993
-------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Gas sales revenue:
Residential.............................................. $101,542 $110,173 $117,222
Commercial............................................... 49,100 53,770 57,949
Industrial............................................... 15,139 14,953 15,501
-------- -------- ------------
Total gas sales revenue.................................. 165,781 178,896 190,672
Cost of gas sold........................................... 111,005 121,643 130,741
-------- -------- ------------
Gross margin.......................................... 54,776 57,253 59,931
Gas transportation revenue................................. 11,736 11,918 11,937
-------- -------- ------------
Total sales and transportation margin................. $66,512.. $ 69,171 $ 71,868
-------- -------- ------------
-------- -------- ------------
Throughput volumes (millions of cubic feet):
Gas sales volumes:
Residential........................................... 20,773 22,352 23,072
Commercial............................................ 11,116 11,890 12,489
Industrial............................................ 3,707 3,513 3,609
Total gas sales volumes............................... 35,596 37,755 39,170
Gas transportation volumes............................... 22,357 22,147 18,920
Total throughput.................................... 57,953 59,902 58,090
Degree days:
Actual................................................... 6,397 7,018 6,959
Percent of normal........................................ 93% 104% 104%
Average number of gas sales customers...................... 200,028 204,839 209,846
</TABLE>
Fluctuations in residential and commercial natural gas sales volumes are
primarily the result of increases in the number of customers and variations in
temperature. The degree days in the above table show that 1992 was much colder
than 1991 and slightly colder than the twelve months ended September 30, 1993.
Industrial sales and transportation volumes and margins are primarily dependent
upon the comparative cost of alternate fuels, economic conditions and government
policies.
Southeastern and Michigan Gas are subject to the jurisdiction of the
Michigan Public Service Commission ("MPSC") as to various phases of its
operations including rates, accounting, service standards and the issuance of
securities. Battle Creek is subject to the jurisdiction of the MPSC as to
various phases of its operations including accounting, service standards and
issuance of securities, but not as to rates. Battle Creek's rates are subject to
the jurisdiction of the City Commissioners of Battle Creek, Michigan.
S-6
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SEMCO ENERGY SERVICES, INC.
SEMCO was formed in 1986 to take advantage of the natural gas marketing
opportunities created by deregulation in the natural gas industry. SEMCO also
has operations and interests in natural gas transmission and gathering systems,
an underground natural gas storage field, a gas processing plant and oil and gas
properties. Some of these interests were obtained through equity investments
where an unrelated party is the operator. The majority of these activities are
regulated by various state regulatory agencies with respect to maximum rates
charged to customers. Set forth below are SEMCO's operating revenues, cost of
gas, volumes, average number of customers and earnings (loss) from equity
investments for the years 1991 and 1992 and the twelve months ended September
30, 1993:
<TABLE>
<CAPTION>
TWELVE
YEAR ENDED DECEMBER 31, MONTHS ENDED
----------------------- SEPTEMBER 30,
1991 1992 1993
------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Natural gas marketing operations:
Gas marketing revenues................................ $48,497 $54,595 $67,032
Cost of gas marketed.................................. 46,237 52,347 63,920
------- ------- -------------
Gross margin....................................... $ 2,260 $ 2,248 $ 3,112
------- ------- -------------
------- ------- -------------
Gas volumes marketed (millions of cubic feet)......... 28,636 29,637 29,963
Average number of customers........................... 146 161 158
Other operating revenues................................ $ 1,763 $ 2,983 $ 3,547
Earnings (loss) from equity investments................. 801 478 (407)
</TABLE>
SEMCO's gas marketing margins and volumes are sensitive to the comparative
costs of alternate fuels, seasonal patterns and competition within the gas
marketing industry. As FERC Order 636 (see "Recent Developments--Order 636") is
implemented, the gas marketing industry will face increasing competition but
will also be presented with new opportunities.
SOUTHEASTERN DEVELOPMENT COMPANY
SEDCO's principal activities consist of developing a residential real
estate project and assisting in the gas supply and transportation procurement
for a cogeneration general partnership in which it owns a 50% interest.
At this time, SEDCO has no plans to expand its real estate operations.
SOUTHEASTERN FINANCIAL SERVICES, INC.
SFS has been active in leasing motor vehicles and data processing equipment
primarily to companies of the consolidated group.
RECENT DEVELOPMENTS
REFINANCING PLANS
The Company intends to issue long-term debt in the near future and use the
proceeds to redeem higher cost long-term debt. A portion of the unamortized debt
expenses and call premiums are expected to be written off and to cause a
one-time charge to earnings estimated at $1,450,000 (net of tax), or $.15 per
share. This charge may be included in 1993 results even though the refinancing
is planned for 1994.
RECENT LITIGATION
Vesta Energy Corporation ("Vesta") has filed a complaint in the Federal
District Court for the Northern District of Oklahoma against seven defendants,
including Southwestern Energy Company ("Southwestern") and the NOARK Pipeline
System ("NOARK"), an Arkansas Limited Partnership. SEMCO's subsidiary, SEMCO
Arkansas Pipeline Company, holds a 31.67% general partnership interest in NOARK
and has guaranteed 40% of NOARK's debt service on its approximately $88 million
of debt. Southwestern holds a
S-7
<PAGE> 8
47.33% general partnership interest in NOARK and has guaranteed 60% of NOARK's
debt service. Neither the Company nor any of its subsidiaries is a party to the
suit.
Vesta seeks actual damages on several theories in an aggregate amount
exceeding $1 million, seeks punitive damages in excess of $1 million and seeks
to rescind its contracts with certain of the defendants, including its contract
to transport gas on the NOARK system ("the NOARK Contract"). Under the terms of
the NOARK Contract, Vesta is obligated to transport up to 50,000 Mcf (an Mcf is
a thousand cubic feet) of firm gas per day on the NOARK system at the full firm
rate. This obligation requires Vesta to pay NOARK a demand fee equal to
approximately 19.3 cents per Mcf on the 50,000 Mcf/day and approximately 9.2
cents per Mcf for volumes actually transported on the NOARK system.
On January 1, 1994, Vesta discontinued shipments of firm gas pursuant to
the NOARK Contract and ceased payment of the demand fee. Vesta had been shipping
approximately 32,000 Mcf per day, generating revenues of approximately $380,000
per month to NOARK. Prior to Vesta's ceasing to ship firm gas on the NOARK
system, NOARK was transporting approximately 90,000 Mcf per day at firm and
interruptible rates. NOARK has an operating capacity of 141,000 Mcf per day.
Southwestern, which was providing approximately 25,000 Mcf per day of the gas
transported by Vesta over the NOARK system, has indicated its current intent to
continue to ship those volumes over the NOARK system, initially at the full firm
rate, generating NOARK revenues of approximately $210,000 per month. As these
circumstances continue, the loss of revenues to NOARK of approximately $170,000
per month reduces the Company's net income by approximately $35,000 per month.
It is impossible to predict the outcome of this litigation. Southwestern
has indicated, after initial review of the complaint and relevant facts, that it
believes there is no merit to the lawsuit and that it intends to counterclaim
asking for specific performance of the NOARK Contract to transport gas and/or
damages.
SFAS 106
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." SFAS 106 required the Company to
change its practice of accounting for postretirement benefits other than
pensions from the "pay-as-you-go," or cash basis, to the accrual basis. The
Company currently provides postretirement health care benefits to substantially
all retired employees.
Pursuant to a generic order issued by the MPSC, the Company is recording a
liability and a corresponding regulatory asset for the Utility Subsidiaries'
portion of SFAS 106 costs. The generic order provides for recovery of this
regulatory asset provided a utility files a general rate case prior to 1996 and
demonstrates the need for a rate increase to compensate for this additional
cost. Based on actuarial estimates, the Company's annual cost of providing such
postretirement health benefits is currently approximately $5,500,000. The
Company is currently expensing the portion of SFAS 106 costs not attributable to
the Utility Subsidiaries. As the majority of SFAS 106 costs relate to the
Utility Subsidiaries' operations, adoption of the standard did not have a
material effect on results of operations in 1993.
In order to recover revenue to offset these SFAS 106 costs, it will be
necessary for each of the Utility Subsidiaries to file for increased rates
before 1996. Every aspect of the business of a utility is open to scrutiny when
its rates are redetermined. The outcome of future rate cases cannot be
predicted.
ORDER 636
Interstate pipelines are required to comply with the Federal Energy
Regulatory Commission's ("FERC") Order 636 ("Order 636") by the 1993-1994
heating season. Order 636, intended to increase competition within the gas
industry, requires pipelines to unbundle their services and instead offer
separate service for gas transportation, storage and gathering.
Competition
As a result of this restructuring of interstate pipeline service, natural
gas distribution companies, including the Utility Subsidiaries, have the ability
to select and pay for only those pipeline services they require. In
S-8
<PAGE> 9
addition, Order 636 allows customers on natural gas distribution systems to
purchase the same level of unbundled service directly from the interstate
pipelines. Under such circumstances, natural gas distribution companies
generally provide transportation services to those customers.
It is expected that the availability of unbundled pipeline services to
customers will result in pressure on gas distribution companies to offer similar
unbundled services in order to compete with the pipelines. The Company
anticipates this competition may result in pressure to reduce natural gas
transportation margins. Currently, the Utility Subsidiaries are providing
transportation services principally to large industrial customers.
In addition to pressure on the transportation margins of the Utility
Subsidiaries, Order 636 will impact the natural gas marketing operations of
SEMCO. Access to unbundled pipeline services is expected to attract new
competitors to the marketing industry and present opportunities for marketers to
offer expanded services to their customers.
Gas Supply
Order 636 has the effect of shifting the risk of securing reliable gas
supply and managing pipeline capacity from the interstate pipelines to local gas
distribution companies. As a result, the Utility Subsidiaries face more complex
gas supply procurement issues.
The Utility Subsidiaries are served by four interstate pipelines. Panhandle
Eastern Pipe Line Company ("Panhandle") began operating under Order 636 in May
1993. ANR Pipeline Company ("ANR"), Great Lakes Gas Transmission Company ("Great
Lakes") and Northern Natural Gas Company ("Northern Natural") received authority
from the FERC to substantially implement their restructuring plans effective
November 1, 1993. In conjunction with these plans, the FERC has given interstate
pipelines authority to directly bill customers for certain transition costs
resulting from the restructuring. As former purchasers of bundled interstate
pipeline service, the Utility Subsidiaries will be responsible for some of these
transition costs.
To date, direct-billed transition costs from Panhandle have been
immaterial. The Company does not anticipate further direct billings from
Panhandle because its restructuring process is complete. Direct-billed
transition costs from Northern Natural are expected to be approximately
$800,000. The Company is not subject to any direct-billed transition costs
related to Great Lakes' restructuring. At this time, the Company is unable to
estimate the amount of direct-billed transition costs it will incur as a result
of ANR's restructuring plan.
The Company believes all direct-billed transition costs should be
recoverable from ratepayers.
S-9
<PAGE> 10
USE OF PROCEEDS
The net proceeds from the sale of 650,000 shares of Common Stock offered
hereby are estimated to be $12,755,000 ($14,675,750 if the Underwriter's
over-allotment option is exercised in full). The net proceeds will be used to
pay down short-term debt incurred to finance the ongoing construction program of
the Utility Subsidiaries and for general corporate purposes. At November 30,
1993, the Company had outstanding short-term borrowings (excluding current
maturities of long-term debt) of approximately $62,500,000 with a weighted
average interest rate of 4.23%.
The Company's construction expenditures totaled approximately $25,000,000
for the year ended December 31, 1992 and are estimated to be approximately
$20,000,000 for the year ended December 31, 1993.
CAPITALIZATION
The following table sets forth the short-term indebtedness and
capitalization of the Company at September 30, 1993 and as adjusted to reflect
the issuance and sale of the 650,000 shares of Common Stock offered hereby and
the application of the net proceeds therefrom to reduce short-term debt.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
--------------------------------------------------------
ACTUAL AS ADJUSTED(1)
-------------------------- --------------------------
PERCENT OF PERCENT OF
AMOUNT CAPITALIZATION AMOUNT CAPITALIZATION
-------- -------------- -------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Short-term debt................................. $ 51,865 $ 39,110
-------- --------
-------- --------
Capitalization:
Long-term debt (less current portion):
Parent..................................... $ 91,551 49.3% $ 91,551 46.2%
First mortgage bonds of Southeastern....... 9,480 5.1 9,480 4.8
Cumulative preferred stock of Southeastern.... 3,100 1.7 3,100 1.5
Convertible preferred stock................... 190 0.1 190 0.1
Common stockholders' equity................... 81,214 43.8 93,969 47.4
-------- ------ -------- ------
Total capitalization..................... $185,535 100.0% $198,290 100.0%
-------- ------ -------- ------
-------- ------ -------- ------
</TABLE>
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(1) Does not reflect the issuance of debentures which the Company intends to
issue in the near future, the net proceeds from which will be used for the
redemption of certain long-term debt instruments including the payment of
premiums due on such redemptions.
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<PAGE> 11
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded in the over-the-counter market and quoted on the
NASDAQ National Market System under the symbol SMGS. The following table sets
forth, for the period indicated, the high and low sale prices of the Common
Stock, as reported on the NASDAQ National Market System, and cash dividends paid
per share. Prices and cash dividends have been adjusted to reflect five percent
stock dividends in May 1991, May 1992 and May 1993.
<TABLE>
<CAPTION>
CASH
STOCK PRICE DIVIDENDS
---------------- PAID
HIGH LOW PER SHARE
------ ------ ---------
<S> <C> <C> <C>
Year Ended December 31, 1991:
1st Quarter.................................... $13.39 $11.67 $.173
2nd Quarter.................................... 17.69 12.53 .173
3rd Quarter.................................... 15.42 13.16 .181
4th Quarter.................................... 14.97 13.16 .181
Year Ended December 31, 1992:
1st Quarter.................................... 15.42 13.61 .181
2nd Quarter.................................... 15.95 14.29 .181
3rd Quarter.................................... 16.91 14.76 .190
4th Quarter.................................... 19.53 16.19 .190
Year Ended December 31, 1993:
1st Quarter.................................... 19.76 17.38 .190
2nd Quarter.................................... 22.25 19.00 .190
3rd Quarter.................................... 24.25 20.00 .200
4th Quarter.................................... 25.75 21.25 .200
Year Ended December 31, 1994:
1st Quarter (through January 18, 1994)......... 22.75 20.50 (1)
</TABLE>
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(1) Dividends for the first quarter have historically been declared at the Board
of Directors meeting held in January of each year. This meeting is expected
to be held on January 20 this year.
See the cover page of this Prospectus Supplement for a recent sale price of
the Common Stock. As of December 21, 1993, there were approximately 7,300
holders of record of the Common Stock.
The Company and its predecessor have paid cash dividends quarterly on the
Common Stock without interruption since 1956. While the Company's Board of
Directors' current policy is to pay cash dividends on the Common Stock on a
quarterly basis, future cash dividends will necessarily be dependent upon the
policies of the Board of Directors and the Company's earnings, financial
condition and other factors.
The Company has also paid five percent stock dividends in each of the last
eleven years. The decision to pay or not to pay a stock dividend in 1994 will be
made by the Board of Directors in April 1994. Future stock dividends will
necessarily be dependent upon earnings per share growth, policies of the Board
of Directors and other factors.
The Company has a Dividend Reinvestment and Common Stock Purchase Plan
pursuant to which shareholders may automatically reinvest Common Stock cash
dividends in shares of the Company's Common Stock. Shareholders may also make
optional cash purchases of Common Stock from the Company. Such shares are
offered by means of a separate prospectus.
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<PAGE> 12
UNDERWRITING
The Underwriter, Dean Witter Reynolds Inc., has agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase from the Company
the 650,000 shares of Common Stock offered hereby.
The Underwriter is committed to purchase all of the shares of Common Stock
if any shares are purchased.
The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Common Stock directly to the public at the public offering
price set forth on the cover page of this Prospectus Supplement and to certain
dealers (who may include the Underwriter) at the public offering price less a
concession not to exceed $.46 per share. Such dealers may reallow a concession
not to exceed $.10 per share in sales to other dealers. After the initial public
offering, the public offering price and concessions and reallowances to dealers
may be changed by the Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933 (the
"Securities Act"), or to contribute to payments that the Underwriter may be
required to make in respect thereof.
The Company has granted the Underwriter an option, exercisable within 30
days from the date of this Prospectus Supplement, to purchase up to an
additional 97,500 shares of Common Stock at the same price per share as the
650,000 shares offered hereby, less underwriting discounts and commissions. The
Underwriter may exercise the option only for the purpose of covering
over-allotments, if any, made in connection with the distribution of the Common
Stock to the public.
The Company has agreed that, until 180 days after the date of this
Prospectus Supplement, it will not, without the prior written consent of the
Underwriter, sell, offer to sell, issue, distribute, contract to sell or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
options, rights or warrants with respect to any such shares or register for sale
under the Securities Act, any shares of Common Stock except for the Common Stock
offered hereby and except pursuant to the exercise of any currently outstanding
rights, warrants or options of the Company described in this Prospectus
Supplement or the accompanying Prospectus, or upon conversion of the Company's
outstanding Convertible Preferred Stock; provided that the Company may grant
options under its existing stock plans and issue stock under its existing
Dividend Reinvestment and Common Stock Purchase Plan and Employee Stock
Ownership Plan.
S-12
<PAGE> 13
PROSPECTUS
SOUTHEASTERN MICHIGAN GAS ENTERPRISES, INC.
DEBENTURES
AND
COMMON STOCK
------------------------
Southeastern Michigan Gas Enterprises, Inc. (the "Company") may offer from
time to time its Debentures (the "Debentures") in one or more series, and its
Common Stock ($1 Par Value) (the "New Common Stock," and, together with the
Debentures, the "Securities"), in amounts, at prices and on terms to be
determined at the time of sale. The aggregate principal amount of the Debentures
will not exceed $80,000,000, and the aggregate number of shares of New Common
Stock will not exceed 750,000.
For each offering of Securities for which this Prospectus is being
delivered, there will be an accompanying Prospectus Supplement (the "Prospectus
Supplement") that sets forth: with respect to the Debentures, the designation,
principal amount, interest rate, interest payment dates, maturity, public
offering price, any redemption terms or other specific terms of the series of
Debentures in respect of which this Prospectus is being delivered; and, with
respect to the New Common Stock, the specific number of shares and public
offering price of the New Common Stock in respect of which this Prospectus is
being delivered. This Prospectus may not be used to consummate sales of the
Securities unless accompanied by a Prospectus Supplement.
The outstanding shares of Common Stock are, and the shares of New Common
Stock will be, traded in the over-the-counter market and quoted on the NASDAQ
National Market System.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Company may sell the Securities through underwriters, through dealers,
directly to one or more institutional purchasers or through agents. See "Plan of
Distribution." Underwriters may include Edward D. Jones & Co., Dean Witter
Reynolds Inc., such other underwriter or underwriters as may be designated by
the Company or an underwriting syndicate represented by one or more of such
firms. Such firms may also act as agents. The Prospectus Supplement will set
forth the names of such underwriters, dealers or agents, if any, any applicable
commissions or discounts and the proceeds to the Company from such sale.
------------------------
The date of this Prospectus is December 28, 1993.
<PAGE> 14
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"SEC"). Such reports, proxy and information statements, and other information
can be inspected and copied at the public reference room of the SEC at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549; 500 W. Madison Street, Suite
1400, Chicago, Illinois 60661; and Seven World Trade Center, New York, New York
10048. Copies of such material can also be obtained at prescribed rates from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. The Company has filed with the SEC a Registration
Statement on Form S-3 (together with any amendments thereto, the "Registration
Statement") under the Securities Act of 1933 with respect to the Securities
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits thereto, certain parts of which
are omitted in accordance with the rules and regulations of the SEC. Statements
contained in this Prospectus as to the contents of any document referred to
herein are not necessarily complete, and, in each instance, reference is made to
the copy of such document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
The Company's Common Stock is quoted on the NASDAQ National Market System
under the symbol SMGS. Reports and other information concerning the Company may
be inspected at the National Association of Securities Dealers, Inc. located at
1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference the following documents filed
with the SEC pursuant to the Exchange Act:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1992; and
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30 and September 30, 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the securities offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
Any person, including any beneficial owner, receiving a copy of this
Prospectus may obtain without charge, upon written or oral request, a copy of
any of the documents incorporated by reference herein, except for the exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents) and except for documents delivered herewith.
Requests should be directed to Dolores E. Noble, Manager, Shareholder Services
of Southeastern Michigan Gas Enterprises, Inc., 405 Water Street, Port Huron,
Michigan 48060, telephone number (313) 987-2200.
2
<PAGE> 15
THE COMPANY
The Company was established as a holding company in 1977 and has its
principal executive offices located at 405 Water Street, Port Huron, Michigan
48060, (313) 987-2200. The Company is the parent company of six direct
subsidiaries. Substantially all of the consolidated earnings of the Company are
derived from natural gas operations.
Southeastern Michigan Gas Company, Michigan Gas Company and Battle Creek
Gas Company (collectively, the "Utility Subsidiaries") purchase, distribute and
transport natural gas to the public in twenty-three counties in the lower and
upper peninsulas of Michigan. The three other direct subsidiaries of the Company
are SEMCO Energy Services, Inc., Southeastern Development Company and
Southeastern Financial Services, Inc.
USE OF PROCEEDS
The net proceeds from the sale of the Debentures will be used primarily for
the redemption of some or all of the following long-term instruments including
the payment of the premiums due on such redemptions of approximately $3.2
million:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
AS OF
NOVEMBER 30, 1993
-----------------
<S> <C>
Southeastern Michigan Gas Enterprises, Inc.
10.0% Debentures due 2007................................... $21,176,000
10.0% Debentures due 2008................................... 12,528,000
9.8% Debentures due 2014.................................... 28,720,000
Southeastern Michigan Gas Company First Mortgage Bonds
9.5% series due 1995........................................ 3,500,000
8.25% series due 1997....................................... 3,500,000
10.75% series due 2000...................................... 1,225,000
9.25% series due 2002....................................... 1,420,000
</TABLE>
Additional net proceeds from the sale of the Debentures, if any, and the
net proceeds from the sale of the New Common Stock will be used to pay down
short-term debt incurred to finance the ongoing construction program of the
Utility Subsidiaries and for general corporate purposes. At November 30, 1993,
the Company had outstanding short-term borrowings (excluding current maturities
of long-term debt) of approximately $62,500,000 with a weighted average interest
rate of 4.23%.
DESCRIPTION OF COMMON STOCK
The Company's authorized capital stock presently consists of 20,000,000
shares of Common Stock, $1 Par Value (the "Common Stock") and 500,000 shares of
Cumulative Preferred Stock, $1 Par Value (the "Preferred Stock"), issuable in
series.
At November 30, 1993, the outstanding Common Stock consisted of 9,640,082
shares and the outstanding Preferred Stock consisted of 7,605 shares of $2.3125,
Series A, Convertible Cumulative Preferred Stock (the "Convertible Preferred
Stock"). The Convertible Preferred Stock is not subject to a sinking or purchase
fund and, at November 30, 1993, was convertible into Common Stock at a ratio of
4.11 shares of Common Stock for each share of Convertible Preferred Stock. The
issuance of the shares of New Common Stock offered by this Prospectus will not
result in adjustments to such conversion ratio.
The Company will covenant in the indenture pursuant to which the Debentures
will be issued (the "Indenture") that it will not declare any dividends (other
than dividends payable in shares of its stock) on any shares of any class of its
capital stock or repurchase any shares of any class of its capital stock either
(1) if after giving effect to such actions, the sum of the aggregate amount
declared as dividends (other than dividends payable in shares of its stock) on
all such shares after September 30, 1993 and the aggregate amount
3
<PAGE> 16
used to repurchase any such shares after September 30, 1993, exceeds the sum of
(a) the consolidated net income accrued after September 30, 1993, and (b)
$11,000,000, or (2) if after giving effect to such actions, the shareholders'
equity of the Company is less than $80,000,000.
Subject to the above and to the rights of the holders of the Preferred
Stock to receive full quarterly cumulative dividends, both past and current,
holders of the shares of Common Stock are entitled to receive dividends as and
when declared by the Board of Directors in its discretion out of the surplus of
the Company. No dividends may be paid, or other payment made with respect to the
shares of Common Stock, during a period when dividends on any Preferred Stock
are in arrears. Holders of the Convertible Preferred Stock are entitled to
receive preferential cumulative cash dividends at an annual rate of $2.3125 per
share.
VOTING RIGHTS
The holders of the Common Stock are entitled to one vote for each share
held of record and, except as stated below with respect to the Preferred Stock
and except as may be otherwise required by law, have exclusive voting rights.
In the event of a default in payment of eight quarterly dividends (whether
or not consecutive) on any series of outstanding Preferred Stock, the holders of
all series of the outstanding Preferred Stock shall have the right, voting as a
single class irrespective of series, to elect such number of directors as shall
constitute one less than a majority of the full Board of Directors, and, during
the continuance of such default, the holders of the Common Stock, voting as a
second class, shall have the right to elect the remaining members of the Board
of Directors. The holders of Preferred Stock are not entitled to vote on other
matters except those matters having a fundamental effect on the rights of such
holders. Currently there are approximately 7,600 shares of Preferred Stock
outstanding with an annual dividend requirement of approximately $17,600.
The Company's Articles of Incorporation (the "Articles") provide for three
classes of directors. The term of office of each class is three years and the
term of one class expires each year. The Company's bylaws provide for a Board of
Directors with eleven members. The classes will be comprised of as nearly equal
a number of directors as possible. Therefore, either three or four members of
the Board of Directors will be elected at each Annual Meeting of Shareholders.
The Articles provide for cumulative voting of shares in elections of
directors. Thus, for example, when four directors are to be elected, one person
or group controlling more than 20% of the Common Stock could be assured of
electing one director.
Under Michigan law, certain control shares do not have the right to vote
except to the extent such voting rights are granted by a majority of shares held
by others. Also, consistent with Michigan law and the Company's bylaws, if such
control shares are not accorded full voting rights, the Company has the right to
acquire such control shares at fair value. Control shares generally refer to
shares which, when acquired, have voting power with respect to Common Stock
that, when added to all other shares of Common Stock owned by a shareholder, or
with respect to which that shareholder may exercise or direct the exercise of
voting power, would entitle that shareholder, directly or indirectly, alone or
as part of a group, to exercise or direct the exercise of the voting power of
more than 20%, 33% or 50% of Common Stock in the election of directors. The
Company believes that no shareholder beneficially owns in excess of 5% of the
Company's Common Stock.
The provisions of the foregoing three paragraphs may discourage open market
purchases of the Common Stock or a non-negotiated tender or exchange offer for
such stock and, accordingly, may limit a stockholder's ability to realize a
premium over the market price of the Common Stock in connection with any such
transaction.
LIQUIDATION RIGHTS
After satisfaction of the preferential liquidation rights of the Preferred
Stock ($25.00 per share in the case of the Convertible Preferred Stock and such
amount as may be fixed by the Board of Directors in connection with the creation
of other series of Preferred Stock plus all dividends accrued or in arrears) and
the payment
4
<PAGE> 17
of outstanding debt, the holders of the Common Stock are entitled to share pro
rata in the distribution of all remaining assets.
PREEMPTIVE AND CONVERSION RIGHTS
The holders of shares of Common Stock have no preemptive or conversion
rights.
REDEMPTION PROVISIONS AND SINKING FUND PROVISIONS
The Common Stock is not redeemable and has no sinking fund.
LIABILITY FOR FURTHER ASSESSMENT
The outstanding shares of Common Stock are, and the shares of New Common
Stock to be issued hereby will be, fully paid and non-assessable.
TRADING
The Company's Common Stock is traded in the over-the-counter market and is
quoted on the NASDAQ National Market System under the symbol SMGS. The Company
acts as its own transfer agent and registrar.
DESCRIPTION OF THE DEBENTURES
GENERAL
The Debentures will be issued from time to time and offered on terms to be
determined at the time of sale. The Debentures may be issued in one or more
series with the same or various maturities.
The Debentures in respect of which the accompanying Prospectus Supplement
is being delivered are to be issued under the Indenture between the Company and
an independent trustee (the "Trustee").
The Debentures in respect of which the accompanying Prospectus Supplement
is being delivered will be in a principal amount, mature, bear interest and have
other specific terms as set forth in such accompanying Prospectus Supplement.
Interest on such Debentures will accrue from, and be payable semi-annually on,
the dates set forth in such accompanying Prospectus Supplement.
The following statements are summaries of, and are in all respects subject
to and qualified by, the Indenture.
FORM
The Debentures issued pursuant to the Prospectus Supplement will be
represented by one certificate (the "Global Security") to be registered in the
name of the nominee of The Depository Trust Company ("DTC") or any successor
depository (the "Depository"). The Depository will maintain the Debentures in
denominations of $1,000 and integral multiples thereof through its book-entry
facilities. In accordance with its normal procedures, the Depository will record
the interests of each Depository participating firm ("Participant") in the
Debentures, whether held for its own account or as a nominee for another person.
SECURITY AND PRIORITY
The Debentures will be unsecured obligations and will rank on an equal
basis with all other unsecured indebtedness of the Company outstanding from time
to time.
SINKING FUND
The Debentures will not be subject to a sinking fund.
5
<PAGE> 18
REDEMPTION
At the election of the Company, the Debentures will be redeemable at any
time after a certain date and at certain redemption prices specified in the
Prospectus Supplement.
The Prospectus Supplement may describe certain redemption rights of
Debenture holders.
RESTRICTIVE COVENANTS
The Prospectus Supplement describes the restrictive covenants in the
Indenture which limit the ability of the Company to create liens on its
property, create certain indebtedness, declare dividends (other than dividends
payable in shares of stock) and sell Utility Subsidiary common stock.
DEFAULTS AND REMEDIES
An "Event of Default" with respect to any series of Debentures is defined
as default for 30 days in payment of interest on the series of Debentures,
default in payment of principal on such Debentures, failure by the Company to
comply with any of its other agreements in the Indenture which remains uncured
for 60 days after notice, acceleration of certain indebtedness of the Company or
its subsidiaries under terms of any instrument under which indebtedness of
$2,000,000 or more is outstanding or secured and certain events of bankruptcy or
insolvency.
The Indenture provides that the Trustee, within 90 days after the
occurrence of an Event of Default which is continuing and known to it, shall
give notice thereof to the holders of the series of Debentures, provided that,
except in the case of an Event of Default in the payment of principal or
interest on any of such Debentures, the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the interests of the holders of such Debentures.
In case an Event of Default shall occur and be continuing, the Trustee or
the holders of at least 25% in aggregate principal amount of the affected series
of Debentures then outstanding, by notice in writing to the Company, may declare
all unpaid principal and accrued interest on such series of Debentures then
outstanding to be due and payable immediately. Any such acceleration may be
rescinded by the holders of a majority in principal amount of such Debentures
then outstanding, upon the conditions provided in the Indenture.
Defaults may be waived by the holders of a majority of the principal amount
of the affected series of Debentures, upon the conditions provided in the
Indenture, except for (i) an uncured default in payment of principal of or
interest on the Debentures, (ii) an uncured failure to make any redemption
payment or (iii) an uncured default with respect to a provision which cannot be
modified under the terms of the Indenture without the consent of each holder
affected.
The Indenture includes a covenant that the Company will file annually with
the Trustee a statement regarding compliance by the Company with the terms
thereof and specifying any defaults by the Company of which the signers may have
knowledge.
The holders of a majority in principal amount of all outstanding Debentures
of the affected series will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the Trustee,
provided that such direction does not conflict with any law or the Indenture,
would not be unduly prejudicial to the rights of other holders and would not
involve the Trustee in personal liability. The Indenture provides that in case
an Event of Default shall occur (and be continuing) and be known to the Trustee,
the Trustee will be required to use the degree of care and skill of a prudent
man in the conduct of his own affairs. The Trustee will be under no obligation
to exercise any of its powers under the Indenture at the request of any of the
holders of the Debentures, unless such holders shall have offered to the Trustee
indemnity satisfactory to it.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture which materially affect the
rights of the holders of the Debentures may be made by the Company and the
Trustee only with the consent of the holders of not less than a majority in
principal amount of the affected series of Debentures then outstanding, provided
that no
6
<PAGE> 19
such modification or amendment may change the stated maturity of any Debenture,
or reduce the principal amount of or interest rate on any Debenture, or change
the interest payment date or otherwise modify the terms of payment of the
principal of or interest on the Debentures, or reduce the percentage required
for modification, or modify certain other provisions of the Indenture, without
the consent of each holder of any Debenture affected thereby.
DISCHARGE OF THE INDENTURE
The Indenture will be discharged and canceled upon payment of all the
Debentures issued under such Indenture or upon deposit with the Trustee of funds
or U.S. Government obligations sufficient to pay the principal of and interest
on such Debentures as they mature prior to redemption or payment.
CONCERNING THE TRUSTEE
NBD Bank, N.A. will be the Trustee under the Indenture. Its address is 611
Woodward Avenue, Detroit, Michigan 48226 (Attention: Corporate Trust Division).
The Company also has appointed NBD Bank, N.A. as the Registrar and Paying Agent
under the Indenture. The Trustee is a lender to the Company under some of the
Company's lines of credit. The Company and its subsidiaries maintain deposit
accounts and conduct other banking transactions with the Trustee in the ordinary
course of business.
The Indenture contains limitations on the rights of the Trustee, should it
for its own account become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
(as defined in the Indenture), it must eliminate such conflict or resign.
PLAN OF DISTRIBUTION
The Company may sell the Securities (i) through underwriters; (ii) through
dealers; (iii) directly to one or more institutional purchasers; or (iv) through
agents. The Prospectus Supplement sets forth the terms of the offering of the
Securities offered thereby, including the name or names of any underwriters,
dealers, purchasers or agents, the purchase price of such Securities and the
proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time. Only firms named
in the Prospectus Supplement are deemed to be underwriters, dealers or agents in
connection with the Securities offered thereby, and if any firm is not named in
such Prospectus Supplement, then such firm will not be a party to the
underwriting agreement in respect of such Securities, will not be purchasing any
such Securities from the Company and will have no direct or indirect
participation in the underwriting of such Securities, although it may
participate in the distribution of such Securities under circumstances entitling
it to a dealer's commission.
If underwriters are used in the sale, the Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
Securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters designated in the Prospectus
Supplement or directly by one or more underwriters. Unless otherwise set forth
in the Prospectus Supplement, the obligations of the underwriters to purchase
the Securities offered thereby will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all such Securities if any
are purchased.
Securities may be sold directly by the Company or through any firm
designated by the Company from time to time, acting as principal or as agent.
The Prospectus Supplement sets forth the name of any dealer or agent involved in
the offer or sale of the Securities in respect of which the Prospectus
Supplement is delivered and the price payable to the Company by such dealer or
any commissions payable by the Company to such
7
<PAGE> 20
agent. Unless otherwise indicated in the Prospectus Supplement, any such agent
is acting on a best efforts basis for the period of its appointment.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act of 1933.
Underwriters, dealers and agents may engage in transactions with or perform
services for the Company in the ordinary course of business.
LEGAL OPINIONS
The validity of the Securities will be passed upon for the Company by
Lawrence J. Gagnon, Secretary and General Counsel of the Company and for any
underwriters by Armstrong, Teasdale, Schlafly & Davis, One Metropolitan Square,
St. Louis, Missouri, 63102.
EXPERTS
The audited consolidated financial statements and schedules of the Company
included or incorporated by reference in this Prospectus and elsewhere in the
Registration Statement of which this Prospectus is a part have been audited by
Arthur Andersen & Co., independent public accountants, as indicated in their
reports with respect thereto, and are included herein or incorporated by
reference herein in reliance upon the authority of such firm as experts in
giving said reports.
8
<PAGE> 21
<TABLE>
<CAPTION>
<S> <C>
</TABLE>
SOUTHEASTERN
MICHIGAN GAS
ENTERPRISES, INC.
[LOGO]
650,000 SHARES
COMMON STOCK
PROSPECTUS SUPPLEMENT
DEAN WITTER REYNOLDS INC.
JANUARY 19, 1994
<PAGE> 22
APPENDIX A
The map of the service territories is a map of Michigan outlining the boundaries
of counties serviced by the Utility Subsidiaries. Each Utility Subsidiary has
a different shade denoting its service territory.
