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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report June 28, 1996 (Date of Earliest Event Reported June 19, 1996)
EL PASO NATURAL GAS COMPANY
(Exact Name of Registrant as Specified in the Charter)
Incorporated in the State of Delaware
(State or Other Jurisdiction of Incorporation)
1-2700 74-0608280
(Commission File Number No.) (I.R.S. Employer Identification)
One Paul Kayser Center 79901
100 North Stanton Street, El Paso, Texas (Zip Code)
(Address of Principal Executive Offices)
(915) 541-2600
Registrant's Telephone Number, Including Area Code
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Item 5. Other Events
On June 19, 1996, El Paso Natural Gas Company ("EPG"), now doing
business as El Paso Energy Corporation, and Tenneco Inc. ("Tenneco")
entered into a definitive merger agreement valued at approximately
$4.0 billion. Consideration will consist of:
o $2.4 billion of assumed Tenneco debt;
o the issuance of EPG equity securities valued at $750 million, based
on the June 18, 1996, closing stock price of $34.875, to Tenneco's
existing common and preferred shareholders, subject to a minimum and
maximum exchange ratio;
o $250 million of new Tenneco preferred stock to be issued prior to
closing; and
o approximately $600 million of assumed liabilities and other
consideration.
The merger is conditioned upon, among other things, the receipt of tax
rulings and opinions stating that the spin-offs and subsequent merger
are tax-free, completion of a debt realignment plan by Tenneco, certain
government approvals, and approval of the Tenneco shareholders. It is
expected these transactions will be completed by year-end 1996. A copy
of the press release further describing the transaction is attached
hereto as Exhibit 99 and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits
Exhibits.
99. Press release dated June 19, 1996.
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SIGNATURES
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 thereunto duly authorized.
El Paso Natural Gas Company
(Registrant)
By /s/ JEFFREY I. BEASON
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Jeffrey I. Beason
Vice President, Controller, and
Treasurer
Date: June 28, 1996
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EXHIBIT INDEX
Exhibit No. Description
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99 Press release dated June 19, 1996
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FOR IMMEDIATE RELEASE
EL PASO ENERGY CORPORATION TO ACQUIRE TENNECO ENERGY
EL PASO, TEXAS, JUNE 19, 1996 -- El Paso Energy Corporation (NYSE:EPG)
and Tenneco Inc. (NYSE:TEN) announced today the execution of definitive
agreements for EPG to acquire Tenneco Energy through a merger. Tenneco Energy
consists of all of the pipeline and energy assets of Tenneco Inc. The
transaction value is approximately $4 billion. The consideration will
consist of:
1. $2.4 billion of assumed Tenneco debt;
2. El Paso equity securities to be issued to Tenneco's existing
common and preferred shareholders valued at $750 million at El Paso's current
stock price;
3. $250 million of new Tenneco preferred stock to be issued prior
to closing; and
4. Approximately $600 million of assumed liabilities and other
consideration.
The combination of El Paso and Tenneco Energy will, by any standard,
create one of the top three natural gas companies in the United States, with
total assets of approximately $8 billion.
The acquisition is part of the larger planned reorganization of Tenneco
Inc., which includes spin-offs to its shareholders of the Newport News
shipbuilding and Automotive-Packaging businesses as separate public companies.
The Automotive-Packaging business will be renamed Tenneco Inc. following the
reorganization.
The residual business of Tenneco after the two spin-offs will primarily
consist of Tenneco Energy, which will be merged with a new subsidiary of El
Paso. The merger and the Tenneco Inc. reorganization are conditioned upon
several events including the receipt of tax rulings and opinions stating
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that the spin-offs and subsequent merger are tax-free, completion of a debt
realignment plan by Tenneco, certain government approvals, and approval of the
Tenneco shareholders. It is expected that these transactions will be completed
by year-end 1996. The merger agreement has been approved by El Paso's and
Tenneco's board of directors.
"El Paso and Tenneco Energy are a natural fit," said William A. Wise,
Chairman, President and Chief Executive Officer of El Paso Energy. "The two
companies complement each other both geographically and operationally, serving
markets from Bakersfield to Boston, and extending to all major gas producing
basins and consuming markets. In addition, the combination creates a larger
critical mass in our non-regulated operations, with higher gas gathering,
processing and marketing volumes and an expanded set of non-regulated growth
opportunities. Importantly, following the merger and implementation of the
combined company operating plan, El Paso expects to realize accretion in
earnings and cash flow per share from the transaction in 1997 and beyond."
"We look forward to combining our organization with Tenneco Energy and
implementing an operating plan to take full advantage of the opportunities this
combination presents," Mr. Wise added. The key elements of this operating plan
include:
1. Developing a long-term rate settlement with Tenneco's transmission
customers, employing the experience El Paso gained from the recent
rate settlement filed on its own mainline transmission system;
2. Maintaining a solid investment grade credit rating, by divesting or
otherwise monetizing approximately $500 million of acquired assets
and raising new common equity in the range of $150 - $250 million to
pay down debt; and
3. Integrating El Paso and Tenneco Energy to capitalize on available
synergies.
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Tenneco and El Paso will cooperate with respect to the operation of
Tenneco Energy prior to closing.
The combined company will keep the name El Paso Energy Corporation and
will be headquartered in Houston, Texas. William A. Wise will remain as
Chairman, President and Chief Executive Officer. Donaldson, Lufkin and Jenrette
Securities Corporation is acting as El Paso's financial advisor.
As part of this transaction, the El Paso shareholders will be asked to
approve the issuance of $750 million of common stock. Based on El Paso's
closing stock price of $34.875 as of June 18, 1996, El Paso will issue
approximately 21.5 million shares to the existing Tenneco common and preferred
shareholders. The number of shares to be issued will be adjusted upward or
downward by a maximum of 10% based upon El Paso's closing stock price for 20
trading days two days prior to closing. In the event the issuance of the common
stock is not approved by El Paso's shareholders, El Paso will issue 7.0 million
shares of common stock, which together with voting preferred stock will have an
aggregate value of $750 million, subject to the adjustment mechanism described
above.
El Paso Energy Corporation, through El Paso Natural Gas Company and
Mojave Pipeline Company, operates one of the nation's largest mainline
transmission systems serving the southwestern region of the United States, with
first quarter 1996 throughput of 3.7 billion cubic feet per day (Bcf/d).
El Paso Field Services owns and operates over 7,700 miles of gathering systems
connected to more than 10,000 wells in the San Juan, Anadarko and Permian
basins, and east Texas and north Louisiana, with current gathering volumes of
1.9 Bdf/d, including processing and treating volumes of 650 million cubic feet
per day. El Paso Energy Marketing is one of the top ten nationwide providers of
natural gas and power marketing services with current sales volumes of 3.3
Bcf/d.
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Tenneco Energy has four principal business segments: Transportation,
Resources, International and Power Generation, and Ventures.
The Transportation segment consists of three separate interstate
pipeline systems, including Tennessee Gas Pipeline, which serve natural gas
markets in 20 states and deliver 2.2 Tcf annually. First quarter 1996
throughput on the Tenneco interstate systems averaged 7.5 Bcf/d.
The Resources segment buys, sells and transports up to 2.5 Bcf/d of
natural gas. This segment includes approximately 1,300 miles of intrastate
lines and interests in eight onshore Gulf Coast and eight offshore gathering
systems, as well as interests in five processing plants.
The Ventures segment provides financing for independent oil and gas
companies and conducts oil and gas exploration and production activities. At
year-end 1995, Tenneco Energy Ventures had 106 Bcfe of proved oil and gas
reserves.
The International and Power Generation segment conducts pipeline and
power plant development and operations internationally. Tenneco Energy operates
a 488 mile gas transmission system it acquired in June 1995 in southwest
Australia and is constructing a 470 mile pipeline in Queensland, Australia. The
International and Power Generation segment is also actively developing a gas
field and power plant in Indonesia and has a portfolio of domestic independent
power plants.
Certain information included in this press release is forward looking
and involves risks and uncertainties, including general economic and
competitive conditions that could significantly impact expected results. For
further information contact:
Norma F. Dunn
Vice President -- Investor and Public Relations
El Paso Energy Corporation
(915) 541-5443
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