SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14(A) INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _________)
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Filed by a Party other than the Registrant [_]
Check the appropriate box:
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Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[X] Soliciting Material Under Rule 14a-12
GPU, INC.
---------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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<PAGE>
August 30, 2000
Dear Shareholder:
While I am writing to report to you on our second quarter, I realize our
recently announced merger with First Energy has eclipsed other developments
at GPU.
A week or so ago, I wrote to provide you with some basic information about
the proposed merger. As I mentioned, this transaction will require your
approval, as well as a number of regulatory approvals at the state and
federal levels. We will be furnishing you with more detailed information
about the proposal in a merger proxy statement, which will be issued
sometime during the next few months.
The full news release announcing the proposed merger is available on our
website, www.gpu.com.
Second Quarter Earnings Lower, as Anticipated
Earnings in the second quarter were lower than last year, as anticipated,
due primarily to the impact of electric utility restructuring in New Jersey
and Pennsylvania, which has included GPU's sale of its generation
facilities, higher energy costs in Pennsylvania, and lower electric
delivery rates charged to customers in New Jersey. Second quarter income
before non-recurring charges was $84 million or $0.69 per share, against
$106 million or $0.84 per share in the second quarter of 1999. After a
non-recurring charge of $295 million after-tax, or $2.43 per share on the
sale of GPU's Australian electric transmission company, GPU PowerNet, net
income for the quarter was a loss of $211 million or $1.74 per share. On
June 30, we announced the sale of PowerNet to Singapore Power
International, a subsidiary of Singapore Power, for approximately US $1.26
billion. While we do not enjoy incurring that kind of a loss, it was in
your interest that we do so, given the weakened outlook for utilities in
Australia. We were pleased to be able to use the proceeds from the sale to
reduce outstanding debt. Net income for the second quarter of 1999 was $47
million or $0.38 per share and included a non-recurring charge of $68
million after-tax, or $0.54 per share resulting from a restructuring order
issued to Jersey Central Power & Light Company by the New Jersey Board of
Public Utilities, and a gain on the sale of the Midlands (now GPU Power UK)
supply business of $9 million after-tax, or $0.08 per share.
For the six months ended June 30, 2000, income before non-recurring items
was $215 million or $1.77 per share, against $269 million or $2.11 per
share for the first half of 1999. The net loss for the first six months of
2000 was $80 million or $0.66 per share, against net income of $238 million
or $1.87 per share in the first half of 1999. The 2000 first half net loss
was after the non-recurring charge of $295 million or $2.43 per share
described above. Net income for the first half of 1999 was after the
non-recurring items noted above, as well as a gain of $28 million
after-tax, or $0.22 per share for the portion of the gain on the sale of
GPU's interest in the Homer City Generating Station related to wholesale
operations.
Continuing to Build Shareholder Value
Even as the FirstEnergy merger process goes forward, we are hard at work
building the value of GPU.
We are giving top priority both to improving the reliability of our
domestic electric network and to reducing operating costs in that
operation. We are also emphasizing our non-regulated businesses such as
construction, through our MYR Group subsidiary; telecommunications,
thorough GPU Telcom Services, Inc.; and e-commerce activities related to
our core business.
In addition, we are continuing to evaluate for possible divestiture, assets
outside our core that may be worth more through their sale than as
continued operations. Early in August, we completed the sale of our Oyster
Creek nuclear plant in New Jersey, which essentially concludes our plan to
exit power generation, announced three years ago.
After an internal review and an evaluation by a financial advisor, Salomon
Smith Barney, we decided to sell through an auction process our interests
in six independent power projects in the United States. These are plants
that do not provide baseload generation for our service territories. That
process is well underway, and we expect to conclude the sales of these
plants later this year. The proceeds will be applied to reducing debt.
On a personal note, let me say that while emotionally, we would have
preferred for GPU to stay independent, agreeing to merge with FirstEnergy
is clearly in the best interest of all GPU shareholders. We believe the
creation of the new organization will strengthen our position in the
marketplace and provide greater opportunities and resources for future
growth and expansion.
Sincerely,
Fred D. Hafer
<PAGE>
IMPORTANT LEGAL INFORMATION UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This newsletter contains forward-looking statements within the meaning of
the "safe harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such
forward-looking statements with respect to revenues, earnings, performance,
strategies, prospects and other aspects of the businesses of FirstEnergy
Corp. and GPU, Inc. are based on current expectations that are subject to
risks and uncertainties. A number of factors could cause actual results or
outcomes to differ materially from those indicated by such forward-looking
statements. These factors include, but are not limited to, risks and
uncertainties set forth in FirstEnergy's and GPU's filings with the SEC,
including risks and uncertainties relating to: failure to obtain expected
synergies from the merger, delays in obtaining or adverse conditions
contained in any required regulatory approvals, changes in laws or
regulations, economic or weather conditions affecting future sales and
margins, changes in markets for energy services, changing energy market
prices, availability and pricing of fuel and other energy commodities,
legislative and regulatory changes (including revised environmental and
safety requirements), availability and cost of capital and other similar
factors. Readers are referred to FirstEnergy's and GPU's most recent
reports filed with the SEC.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed merger, FirstEnergy Corp. and GPU, Inc.
will file a joint proxy statement/prospectus with the SEC. INVESTORS AND
SECURITY HOLDERS ARE ADVISED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS
WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders may obtain a free copy of the joint proxy
statement/prospectus (when available) and other documents filed by
FirstEnergy and GPU with the SEC at the SEC's Web site at
http://www.sec.gov. Free copies of the joint proxy statement/prospectus,
once available, and each company's other filings with the SEC may also be
obtained from the respective companies. Free copies of FirstEnergy's
filings may be obtained by directing a request to FirstEnergy Corp.,
Investor Services, 76 S. Main St., Akron, Ohio 44308-1890, Telephone:
1-800-736-3402. Free copies of GPU filings may be obtained by directing a
request to GPU, Inc., 310 Madison Avenue, Morristown, N.J. 07962,
Telephone: 1-973-401-8204.
GPU, its directors (Theodore H. Black, Fred D. Hafer (Chairman; CEO and
President), Thomas B. Hagen, Robert Pokelwaldt, John M. Pietruski,
Catherine A. Rein, Bryan S. Townsend, Carlisle A.H. Trost, Kenneth L. Wolfe
and Patricia K. Woolf), certain executive officers (Ira H. Jolles (Senior
Vice President and General Counsel), Bruce L. Levy (Senior Vice President
and CFO) and Carole B. Snyder (Executive Vice President Corporate Affairs))
and certain other employees (Jeff Dennard (Director of Corporate
Communications), Joanne Barbieri (Manager of Investor Relations) and Ned
Raynolds (Manager of Financial Communications)) may be deemed under rules
of the SEC to be "participants in the solicitation" of proxies from the
security holders of GPU in favor of the merger. GPU's directors, and
executive officers beneficially own, in the aggregate, less than 1% of the
outstanding shares of GPU common stock. Security holders of GPU may obtain
additional information regarding the interests of "participants in the
solicitation" by reading the joint proxy statement/prospectus relating to
the merger when it becomes available.
<PAGE>
'RULES OF ENGAGEMENT'
AND MERGER AGREEMENT
PROVISIONS: TOPICS FOR DISCUSSION
Merging two companies into one can provide a broad range of
opportunities. However, crossing the line from relationship development
into illegal conduct can create a situation where nobody wins. "There are
rules and regulations surrounding what can and cannot be done after the
announcement of a merger but before critical milestones are met during the
transition time period," said Carole B. Snyder, GPU Service executive vice
president.
Last week, Snyder moderated a session with senior leaders throughout
the organization to help clarify the "Rules of Engagement" for GPU people
to observe while the merger with FirstEnergy is pending. The meeting
covered three primary areas: the transition process; legal implications of
the process; and, provisions of the merger agreement.
The transition process will be guided by a steering committee
comprised of: Pete Burg, FirstEnergy chairman, president and chief
executive officer; Fred D. Hafer, GPU chairman, president and chief
executive officer; Snyder; and two FirstEnergy executives to be named
later. As part of the transition structure, transition teams will be
established to address specific operations and functions of the
organization.
"I recognize there is a great deal of excitement and a desire to reach
out to our counterparts at FirstEnergy," said Snyder. "And we are not
asking that you cut off all casual contacts. However, we need to avoid
moving into areas which will pre-empt the work that will be done by the
transition teams." Those teams are expected to be up and running in the
next four to six weeks.
"We must operate with a heightened sensitivity and awareness that we
are two independent businesses until the closing of the merger," Denny
Kulish, senior attorney -GPU Service, emphasized in an overview of
applicable antitrust laws. Antitrust enforcement actions have sometimes
been commenced where the government believed that communications or
business dealings between two merging (but not yet merged) entities
lessened the competition or 'jumped the gun' during a merger transaction.
Kulish cautioned that undisclosed pricing, major costs that make up that
pricing, revenue strategies, bidding information and marketing plans are
antitrust sensitive areas for information exchange. Generally these matters
are not to be the subject of pre-merger information exchanges between the
companies.
There is a limited exception to these information exchange
restrictions for disclosure of certain sensitive business information if it
is in the course of legitimate due diligence. This includes the evaluation
of the financial and other key terms of the transaction ensuring the
efficient integration of the two organizations into one entity, after
close. "Those employees involved with the due diligence process will be
specifically identified and will have engagement rules with well-defined
boundaries," Kulish said. "They will have confidentiality restrictions and
will be closely coordinating their efforts with legal counsel."
For the general employee population, until close, interactions with
FirstEnergy should be like those with any other independent organization.
"That doesn't mean we can't start developing relationships," Kulish said.
"What it does mean is there are restrictions on what information can be
shared." Kulish asked that all employees be encouraged to seek guidance if
they have any questions regarding sharing of information. (Employees with
questions about anti-trust restrictions should talk to their supervisors
and/or the GPU Legal Department.)
Complementing the legal presentation of the session, Will Matthews,
division counsel, GPUS - Legal, emphasized the rules established by the
regulatory bodies of New Jersey, Pennsylvania, and Ohio. These "codes of
conduct" for individual behavior is the first line of defense to protect
fairness in our industry. "The lines are clearly drawn," he said. Matthews
also described the Securities and Exchange Commission (SEC) requirement
that, as a general matter, written communications regarding the merger made
by GPU to the public, including general communications to employees, must
be filed with the SEC on the day the communication is released.
There are also clear restrictions concerning what GPU itself can and
cannot do during the period of transition. According to the terms of the
merger agreement between FirstEnergy and GPU, there are provisions designed
to ensure that the parties operate in the ordinary course of business and
that they do not materially alter the nature and scope of their business or
financial condition. "The best interpretation of 'business as usual'
includes carrying out events and activities already scheduled within a
one-year plan," said Bruce Levy, GPU, Inc. senior vice president and chief
financial officer. "The merger agreement limits capital spending to levels
included in the GPU capital budget for the year 2000 and future capital
budgets which will be developed in consultation with FirstEnergy," Levy
said. He also noted there are exemptions to these approvals for work either
required by law or deemed essential for reliable service.
The GPU operating restrictions cover the following areas: additional
transmission and generation capacity, modifications to facilities, rates,
affiliate transactions, employee compensation and benefits, collective
bargaining agreements, insurance, cooperation and relationships with
FirstEnergy, issuance of stock, financings, acquisitions, sale or
dispositions of assets, dividends, repurchase of stock, third-party
solicitations, accounting methods, and taxes. (A summary of the merger
agreement is available on the GPU Intranet Merger Issues website.)
As part of the meeting, senior leaders were given guidance regarding
resources to use during the transition to resolve merger-related issues or
questions. However, the simplest guidance for all employees to follow is to
use their usual communication and decision-making channels to get questions
answered.
OPERATING GUIDELINES
Until financial close, we are still two separate organizations and
should not relax our day-to-day practices regarding information sharing
with third parties.
THESE ARE OK:
- Exchange of information in the context of a pre-existing
FirstEnergy/GPU business arrangement (e.g. AFN)
- Exchange of information for due diligence purposes
- Exchange of information within the context of the formal joint
transition process
- Industry association work (e.g. EEI, EPRI)
- Casual conversations
UNLESS SPECIFICALLY PERMITTED FOR CERTAIN GROUPS, THESE ARE NOT OK:
- Conversations about organizational structure, staffing, talent or
integration of processes
- Information exchanges regarding load information, undisclosed
pricing, bidding
- Information regarding revenue strategies or marketing plans
