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): October 17, 1998
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EASTERN ENTERPRISES
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(Exact name of registrant as specified in its charter)
Massachusetts 1-2297 04-1270730
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
9 Riverside Road, Weston, Massachusetts 02493
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 647-2300
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None
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(Former name or former address, if changed since last report)
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Item 1 through 4 and Items 6, 7(a) and (b), 8 and 9. Not Applicable.
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Item 5. Other Events
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On October 17, 1998, Eastern Enterprises and Colonial Gas Company
entered into an Agreement and Plan of Reorganization (the "Merger Agreement").
The Merger Agreement and a press release relating thereto are included herein as
Exhibits 2.1 and 99.1, respectively, and are incorporated herein by reference.
Item 7. Financial Statements and Exhibits
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(c) Exhibits
2.1- Agreement and Plan of Reorganization, dated as of
October 17, 1998, by and between Eastern Enterprises and Colonial Gas
Company (Incorporated by reference to Exhibit 2.1 to Current Report on
Form 8-K of Colonial Gas Company dated October 17, 1998 (File No.
0-10007)).
99.1 - Press Release.
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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.
EASTERN ENTERPRISES
Date: October 26, 1998 By: /s/ L. William Law, Jr.
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L. William Law, Jr.
Senior Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
Exhibits
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2.1 - Agreement and Plan of Reorganization, dated as
of October 17, 1998, by and between Eastern Enterprises and
Colonial Gas Company (Incorporated by reference to Exhibit 2.1
to Current Report on Form 8-K of Colonial Gas Company dated
October 17, 1998 (File No. 0-10007)).
99.1 - Press Release
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Exhibit 99.1
EASTERN ENTERPRISES TO MERGE WITH
COLONIAL GAS COMPANY
Weston and Lowell, MA. -- October 19, 1998 -- Eastern Enterprises
(NYSE: EFU) and Colonial Gas Company (NYSE: CLG) jointly announced today that
the companies have entered into a definitive agreement which provides for the
merger of Colonial Gas into Eastern for $37.50 per share in Eastern stock and
cash. Based on Colonial Gas' shares outstanding as of September 30, 1998, the
transaction values Colonial Gas' equity at $332 million, and taking into account
Colonial's outstanding debt, an enterprise value of $495 million. The purchase
price represents a 27% premium to Colonial Gas' closing price on October 16,
1998 and a multiple of 2.66x Colonial Gas' book value at September 30, 1998.
Under the terms of the merger agreement, Colonial Gas' shareholders
will be permitted to elect either Eastern common stock or cash, with the total
amount of cash consideration fixed at $150 million. Shareholder elections will
be prorated to the extent necessary to maintain this mix of consideration. Based
upon Eastern's current share price ($43.375 as of October 16, 1998) and Colonial
Gas' outstanding shares, Eastern expects to issue about 4.2 million shares in
this transaction. To the extent Colonial Gas shareholders receive Eastern
shares, the transaction will be tax-free. The exchange ratio for the stock
portion of the consideration will be determined based upon Eastern's average
stock price prior to closing, and will be subject to a collar mechanism. Under
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the collar mechanism, if Eastern's average closing stock price per share for a
ten-day period prior to closing is either higher than $47.80 or lower than
$37.56, the portion of the purchase price payable in Eastern shares would be
determined based upon a fixed exchange ratio calculated at such prices. Colonial
Gas' shareholders who receive Eastern stock would benefit from a modest 2%
dividend increase.
J. Atwood Ives, Eastern chairman and chief executive officer commented,
"The merger with Colonial Gas is a significant step in the industry
consolidation strategy Eastern has been pursuing for several years in order to
achieve the economies of scale that will enable us to improve customer service,
lower costs and build value for our shareholders. The Essex Gas acquisition was
the first step and the Colonial Gas merger marks the second step in the
implementation of our strategy to realize the benefits of consolidation in this
highly-fragmented market."
Mr. Ives continued, "Colonial Gas is a well-managed, fast-growing
company that will profit from the synergies of the merger, as well as Eastern's
financial strength. When this transaction is completed, Eastern's combined gas
distribution companies will serve over 725,000 customers in Massachusetts. The
increased size and scope of the combined organization will enable us to provide
enhanced, cost-effective customer service and to accelerate the growth of both
our customer base and gas throughput. This merger will also allow us to build on
the enhanced capabilities of the combined work force -- strengthening our
competitive position in deregulating energy markets. We do not believe this
transaction will be dilutive to Eastern's earnings."
F. L. Putnam, III, Colonial Gas president and chief executive officer,
commented, "We are excited to bring the skills and experience that have been
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developed at Colonial Gas over the last 150 years to Eastern Enterprises. Our
Board of Directors realized that now is the time for us to take decisive action
to better position Colonial Gas for future growth. Based on its review of
strategic alternatives, our Board concluded that a merger with Eastern and its
gas distribution companies would be in the best interests of Colonial Gas'
customers, shareholders and employees. A rate plan, subject to state regulatory
approval, is expected to provide both immediate and long-term benefits for
Colonial Gas' customers. Colonial Gas' shareholders will receive a substantial
premium, as well as the option to participate in the future growth of the energy
industry through ownership of Eastern shares. We are confident that a larger,
stronger and more diversified company, such as we are creating through this
merger, will benefit our employees over the long term."
The merger of Eastern and Colonial Gas has been approved by both
companies' boards and will be accounted for as a purchase transaction. The
transaction is expected to close by mid-year 1999, subject to the receipt of
satisfactory regulatory approvals and the approval of Eastern and Colonial Gas
shareholders. A proposed merger and rate plan for Colonial Gas is expected to be
filed with the Massachusetts Department of Telecommunications and Energy before
year end.
After the merger is completed, Colonial Gas will operate as a
wholly-owned subsidiary of Eastern and as a sister company of Boston Gas and
Essex Gas, Eastern's existing gas distribution companies. F. L. Putnam, Jr.,
Colonial Gas chairman and senior executive officer, will join Eastern's Board
of Trustees upon completion of the merger.
Colonial Gas Company, based in Lowell, Massachusetts, is a local
distribution company serving over 150,000 customers in 24 communities northwest
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of Boston and on Cape Cod (many of which are contiguous to towns served by
Boston Gas and Essex Gas). Colonial Gas also owns and operates Transgas Inc.,
the world's largest over-the-road transporter of liquefied natural gas, which
will become a separate Eastern subsidiary. In its fiscal year ended December 31,
1997, Colonial Gas earned $16.0 million, or $1.87 per share, on operating
revenues of $187.1 million.
Eastern Enterprises owns and operates Boston Gas Company, Essex County
Gas Company, Midland Enterprises Inc. and ServicEdge Partners, Inc. Together,
Boston Gas and Essex Gas are New England's largest distributor of natural gas,
serving 575,000 residential, commercial and industrial customers in Boston and
90 other eastern and central Massachusetts communities. Midland Enterprises,
headquartered in Cincinnati, Ohio, is the leading carrier of coal and a major
carrier of other dry bulk cargoes on the nation's inland waterways, with a fleet
of 2,384 barges and 87 towboats. ServicEdge provides HVAC equipment installation
and service to customers in eastern Massachusetts.
This release and other company reports and statements issued or made
from time to time contain certain "forward-looking statements" concerning
projected future financial performance, expected plans or future operations.
Eastern cautions that actual results and developments may differ materially from
such projections or expectations.
Investors should be aware of important factors that could cause actual
results to differ materially from the forward-looking projections or
expectations. These factors include, but are not limited to:
the effect of this transaction and other strategic
initiatives on earnings and cash flow,
the successful integration of Eastern's gas utility
operations,
temperatures above or below normal in eastern
Massachusetts,
changes in market conditions for barge transportation,
adverse weather and operating conditions on the inland
waterways,
uncertainties regarding the start-up of ServicEdge,
including expense levels and customer acceptance,
changes in economic conditions, including interest rates
and the value of the dollar versus other currencies,
regulatory and court decisions, and
developments with respect to Eastern's previously-disclosed
environmental liabilities.
Most of these factors are difficult to accurately predict and are
generally beyond the control of the Company.
Eastern Enterprises' press releases are available via fax by calling, toll-free,
1-800-311-4607 or on the Internet at http://www.efu.com.
Information regarding Colonial Gas Company can be found on the Internet at
http://www.colonialgas.com
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