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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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.
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(Name of Registrant as Specified in Its Charter)
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(1) Title of each class of securities to which transaction applies: N/A
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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>
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>
MERGER QUESTIONS AND ANSWERS
Here are some questions and answers about the pending merger between
GPU, Inc. and FirstEnergy Corp. as they relate to GPU shareholders and
GPU's finances. Additional questions will appear in future editions of
Connect! as well as the Intranet and the Transition Update bulletin.
GPU SHAREHOLDERS
APPROVAL
o DOES THE GPU BOARD OF DIRECTORS THINK SHAREHOLDERS WILL VOTE FOR
THIS?
The Board of Directors intends to recommend that shareholders approve this
transaction since the board believes that it is in the best interest of the
shareholders to do so. The board believes that the majority of shareholders
will agree and approve the merger.
o WHEN IS THE SHAREHOLDER VOTE?
We expect to schedule the shareholder vote as soon as practical after
the joint proxy statement is approved by the Securities and Exchange
Commission (SEC). The joint proxy statement will be submitted to the SEC
for its review this fall. Once any SEC comments are incorporated, the proxy
will be formally issued to the shareholders of GPU and FirstEnergy and the
shareholder vote date will be set.
PRICES AND SHARES
[] WHEN WILL SHAREHOLDERS BE RECEIVING SOMETHING FROM THEIR BROKER
EXPLAINING THEIR OPTIONS AND EXPLAINING HOW THE STOCK TRANSFER
WILL BE ACCOMPLISHED?
[] WILL IT HAPPEN DIFFERENTLY FOR THOSE PEOPLE WHO HOLD STOCK UNDER
THE TRASOP PROGRAM?
The first thing shareholders will receive is a joint proxy statement
which we expect will be issued later this year. Some time next year, after
the company receives shareholder approval, shareholders will receive an
election form on which they can elect to receive all stock or all cash upon
closing of the merger.
[] IN CAROLE SNYDER'S PRESENTATION, SHE STATED THERE WAS A 30
PERCENT PREMIUM FOR GPU SHARES. WHAT NUMBER WAS THE 30 PERCENT
ADDED TO AND WHY WAS THAT NUMBER CHOSEN?
The 30 percent was the difference between the GPU stock price at the
close of business on Friday Aug. 4, 2000 (which was $28 1/16) and the
merger price of $36 1/2 per share. The negotiations resulted in the merger
price itself not in the premium.
[] WHAT WILL HAPPEN TO THE DIVIDEND LEVELS ON THE STOCK? WILL IT BE
THE SAME LEVEL THAT IT HAS BEEN ON GPU STOCK?
The current dividend on FirstEnergy common stock is $1.50 per share
and the following explanation assumes that FirstEnergy continues that rate.
The total amount of the dividend received by a GPU shareholder after the
merger closes will depend on the number of FirstEnergy shares received.
Under the terms of the agreement the number of shares received for each GPU
share (assuming the shareholder elects to receive all stock) would range
from 1.2318 to 1.5055 depending on the price of FirstEnergy stock in the
20-trading day period ending on the seventh trading day before closing.
This means that a GPU shareholder, who currently receives a dividend of
$2.18 per share, will receive FirstEnergy dividends of $1.85 to $2.26 for
each share of GPU stock currently held.
Said another way, and again assuming the shareholder elects to receive
all stock, the shareholder will trade a share of GPU stock with a current
dividend of $2.18 for between 1.2318 and 1.5055 shares of FirstEnergy stock
with a current dividend of $1.50.
[] HOW CAN GPU KEEP BUYING BACK ITS OWN STOCK?
GPU stock will continue to trade on the open market during the entire
transition period. GPU can continue to repurchase shares on the open market
during this period if it wants to.
[] IS IT OK TO BUY AND SELL GPU STOCK?
During the transition period the same rules apply regarding stock
purchase and sale as applied before. Certain individuals deemed to have
insider information (mostly officers and key managers) are restricted from
buying and selling GPU stock except during certain periods.
[] WILL STOCKHOLDERS GET THE SAME PRICE? CAN YOU REFUSE TO SELL
YOUR STOCK? CAN THEY FORCE YOU TO SELL GPU STOCK?
Once the shareholders approve the transaction all shares will be
treated the same. Upon receipt of all regulatory approvals and closing of
the deal, all GPU shares will be converted into cash or FirstEnergy common
stock according to shareholder elections and the merger agreement. Once the
merger becomes effective, GPU shares will be deleted on the New York Stock
Exchange.
FINANCES
[] WHAT MAKES UP THE $7.4 BILLION IN GPU DEBT?
Actual GPU debt levels have been reduced since the sale of PowerNet.
The current (as of June 30, 2000) debt level is $6.4 billion including $2.4
billion at the three domestic operating companies; $3.0 billion at
Midlands, GasNet and Emdersa and $1.0 billion at the GPU Capital and GPU,
Inc. level.
[] WHAT CONSTITUTES DEBT SERVICES?
Debt service is the amount of cash used each year to pay interest and
principal on outstanding debt. One measure of a company's financial
condition is the percentage of the cash flow generated from operations
needed for debt service.
[] WILL PAYCHECKS SAY FIRSTENERGY?
While we have discussed with FirstEnergy the continued use of the GPU
Energy name in our operations, no discussions have taken place with regard
to the name on the paycheck. This issue will be addressed by one of the
many transition teams that will plan the integration process.
o WHAT DOES "NORMALIZED" NET INCOME AND EARNINGS PER SHARE MEAN (AS
STATED ON THE FACTS AT A GLANCE SHEET)?
"Normalized earnings" is a term used to identify the earnings from
operations of a company without the impact of one-time non-recurring
events. In 1999, for example, there were several one-time charges against
earnings related to the New Jersey restructuring settlement. When the
financial market considers GPU's earnings power, it evaluates the earnings
before such one-time events to determine the future earnings potential of
the company.
o IF WE ARE IN DEBT SO MUCH, WHERE IS THE MONEY COMING FROM TO FUND
ALL OF THE THINGS WE'VE BEEN SUPPORTING IN THE COMMUNITIES?
While GPU and its subsidiaries have a large amount of debt as part
of its capital structure, it is not at a level which prevents the company
from making the necessary operating and capital expenditures needed to meet
our obligations. As it has in the past, the company expects to continue to
generate sufficient funds from operations to pay all debt service,
operating expenses, capital costs and dividends on common and preferred
stock. Funding for community initiatives is part of our ongoing budgeted
operations.
o HOW HAS GPU ACQUIRED SUCH A LARGE DEBT?
GPU, like most other regulated utilities, has funded a large
portion of its capital spending with debt. Regulators encouraged the use of
debt in amounts between 50 percent - 60 percent of total capital as a means
to lower the cost of capital at regulated companies. As GPU has exited
riskier businesses, such as nuclear and fossil generation, the amount of
debt that could be retained has increased. In fact some of the
international businesses like Midlands can retain a good credit rating with
debt levels in excess of 65 percent. Over the years as GPU has grown
through investment in IPPs, foreign utility companies, construction
companies and telecom infrastructure, we have funded most of these
investments with debt.
VALUE OF THE MERGER
o COMPARING GPU AND FIRSTENERGY STATISTICS, WE HAVE MORE ASSETS
THAN THEY DO, BUT THEIR COMMON EQUITY IS GREATER. WE ASSUME
EQUITY IS STRONGER IN THIS MERGER, BUT WHAT IS THE RELEVANCE OF
ASSET VALUE IN THE DEAL?
As a result of the deregulation restructuring, certain GPU assets
and liabilities had to be shown on our balance sheet in a different way.
For example, GPU financial statements include as part of assets the value
of the purchased power contract payments GPU expects to collect from
customers over the future. At the same time, the balance sheet includes as
a liability the payments GPU will make under these contracts over the same
period. These types of assets and liabilities, which GPU must now include
in its financial statements, tend to be misleading when compared to other
utilities which have not yet been through restructuring or which don't have
similar significant purchased power contracts.
[] WHAT IS THE TOTAL COST OF THE TRANSACTION?
The figure can be measured by the equity value of GPU, which is
calculated by multiplying the number of shares (121 million) by the merger
price $36.50 per share ($4.42 billion). Another measure is the equity value
($4.42 billion) plus the amount of debt outstanding at GPU and subsidiaries
($6.4 billion) for a total of $10.82 billion.
<PAGE>
MERGER INTEGRATION STEERING COMMITTEE FORMED
KEVIN KEOUGH NAMED
INTEGRATION PROGRAM LEADER;
GUY PIPITONE NAMED TRANSITION MANAGER
FirstEnergy Chairman and Chief Executive Officer Pete Burg named the
members of the Integration Steering Committee for the planned merger of
FirstEnergy and GPU, Inc. In addition to Burg, who is chairman of the
Steering Committee, the other members are: GPU, Inc. Chairman, President
and Chief Executive Officer Fred D. Hafer, who will serve as vice chairman
of the committee; GPU Service Executive Vice President of Corporate Affairs
Carole B. Snyder; GPU Energy President and Chief Executive Officer Mike
Chesser; FirstEnergy President Tony Alexander; Vice President and Chief
Financial Officer Rich Marsh and Vice President of Distribution and
Customer Service Earl Carey.
Burg also announced that FirstEnergy Vice President of Business
Planning and Ventures Kevin Keough will serve as Integration Program
leader, reporting to the Steering Committee. Keough will oversee the
overall Integration Program, including development of a set of strategic
initiatives designed to set direction in several areas of the new company
and to provide guidance for the Transition Program.
FirstEnergy Vice President of Fossil Generation Guy Pipitone has been
named transition manager. Pipitone will oversee the development and
progress of transition process teams from the major business areas of
FirstEnergy and GPU and other transition teams that will support their
efforts. The teams - under Pipitone's direction - will help determine how
best to organize and operate following the merger.
"The Steering Committee will guide the overall integration effort
between the companies, drive the decision-making process and ensure that
consistent communications reach all employees as decisions are made," Burg
said.
"It's our goal to create one company, not two separate organizations
joined by a holding company," Burg emphasized. "We will be looking for the
best practices from both companies and will build an organization that's
capable of advancing at an accelerated pace the corporate strategy of the
FirstEnergy enterprise."
"We know that employees from both companies want information about the
merger and its effect on the operations of both companies," Hafer said. "We
want to assure all employees that they will be kept up to date on
integration developments and decisions. Right now, we are beginning the
process of developing our detailed integration plans, so employees need to
be patient while we get this initial and key element of our plan
finalized."
According to Keough, "We have an ambitious target of completing the
integration process early next year so that we are ready to implement our
recommendations when the merger receives the necessary regulatory
approvals, which could come by midsummer." He said the employee teams will
be vital to the success of the integration.
Pipitone added, "With our experience from the Ohio Edison and
Centerior Energy merger, I believe that the integration of the companies
will go smoothly. We can get our work done efficiently without affecting
our focus on providing our customers with superior service."
Assisting Keough with the development of strategic initiatives will be
McKinsey & Company, while Deloitte Consulting will assist Pipitone on the
Transition Program. Both firms have worked on numerous electric utility
company mergers, including the merger of Ohio Edison and Centerior Energy
to form FirstEnergy in November 1997.
PROFILE OF STEERING COMMITTEE MEMBERS
FIRSTENERGY CHAIRMAN AND CHIEF EXECUTIVE OFFICER PETE BURG will serve
as vice chairman and CEO of FirstEnergy upon completion of the merger. Burg
is a member of the boards of FirstEnergy's various subsidiaries. Prior to
the merger of Ohio Edison and Centerior Energy, he was president, chief
operating officer and chief financial officer of Ohio Edison. His career
with Ohio Edison began in 1968 as a financial analyst trainee. Following a
series of promotions, he was elected treasurer in 1974, vice president in
1985, senior vice president and chief financial officer in 1989, and served
as interim president of Ohio Edison's subsidiary, Penn Power, from August
1994 through May 1995. He was elected president of Ohio Edison in 1996, and
president and chief executive officer of FirstEnergy in April 1999. He was
elected to his current position in January 2000.
GPU, INC., CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER FRED D.
HAFER will be chairman of FirstEnergy after the merger. Hafer was elected
president and chief operating officer of GPU in 1996 and in 1997 he was
elected to his current position. Hafer has held the positions of president
for Met-Ed/Penelec and Met-Ed, being named to those offices in 1994 and
1986, respectively. He joined the GPU system in 1962 as an engineering
trainee. Following a series of promotions, he was named treasurer in 1970.
In 1977, he was appointed vice president of rate case management for GPU
Service, Inc. In that capacity he directed all federal and state regulatory
activities for Met-Ed, Penelec and Jersey Central Power and Light.
FIRSTENERGY PRESIDENT TONY ALEXANDER also is a member of the boards of
FirstEnergy and its electric utility operating companies. Alexander began
his career in Ohio Edison's Tax Department in 1972. He joined the Legal
Department as an attorney in 1976. He was named senior attorney in 1984,
and promoted to associate general counsel in 1987. He was elected vice
president and general counsel in 1989; senior vice president and general
counsel in 1991; and executive vice president and general counsel of
FirstEnergy in 1997. He was elected to his current position in February
2000.
FIRSTENERGY VICE PRESIDENT EARL CAREY, responsible for distribution
and customer service, joined Ohio Edison in 1962. After serving in numerous
management positions in regional operations and customer service, he was
named vice president of Regional Operations and Customer Service in 1995.
In 1997, he was named to his current position.
GPU ENERGY PRESIDENT AND CHIEF EXECUTIVE OFFICER MIKE CHESSER was
elected to his current position in April 2000. Chesser formerly was
chairman, chief executive officer and president of Itron, a supplier to the
utility industry, a position he had held since June 1999. Prior to joining
Itron, Chesser was the president and chief operating officer of Atlantic
Energy, Inc., at the time of its merger with Delmarva Power to form
Conectiv. Earlier in his career, Chesser was vice president of marketing
and gas operations at Baltimore Gas and Electric Company.
FIRSTENERGY VICE PRESIDENT AND CHIEF FINANCIAL OFFICER RICH MARSH
joined Ohio Edison in 1980 and served in a number of positions in the
financial area, including manager of Assets Administration. He was elected
treasurer of Ohio Edison in 1991 and vice president of Finance for
FirstEnergy in 1997. He was elected to his current position in April 1998.
GPU SERVICE EXECUTIVE VICE PRESIDENT-CORPORATE AFFAIRS CAROLE B.
SNYDER was named to her current position in 1998. Snyder has responsibility
for public and governmental affairs, human resources and corporate
compliance for GPU Service, Inc. Since joining the GPU system in 1982, she
has held various management positions, including regional director,
assistant comptroller and financial reports manager for Met-Ed in Reading.
Prior to becoming executive vice president of Corporate Affairs, she held
the positions of senior vice president of Corporate Affairs for GPU Service
and vice president of Public Affairs for GPU Energy. She serves as a
director on the boards of several GPU subsidiary companies.
FIRSTENERGY VICE PRESIDENT KEVIN KEOUGH is responsible for business
planning, ventures and also for coordinating the development of e-business
strategies across the corporation. Keough joined FirstEnergy in 1999,
following 10 years with the Cleveland office of McKinsey & Company, having
been a partner in the firm since 1995. As a leader within McKinsey's
Electric Power/Natural Gas Practice, he worked with a wide spectrum of
clients in the North American, European, and South African energy
industries on strategic, operational and organizational issues. Throughout
his years with McKinsey, he regularly worked with Ohio Edison and
FirstEnergy.
FIRSTENERGY VICE PRESIDENT GUY PIPITONE is responsible for fossil
generation at the company. Pipitone joined Ohio Edison in 1972 as an
engineer, and he served in a number of positions in the generation area,
including plant manager of the Gorge and W. H. Sammis plants. He was named
manager of the Production Department in 1991 and Akron Division manager in
1993. He was elected vice president of the Generation and Transmission
Group in 1996, and was appointed transition manager for the Ohio Edison and
Centerior Energy merger. Pipitone was elected to his current position in
1997.
"IT'S OUR GOAL TO CREATE ONE COMPANY, NOT TWO SEPARATE ORGANIZATIONS JOINED
BY A HOLDING COMPANY."
- Pete Burg
"WE WANT TO ASSURE ALL EMPLOYEES THAT THEY WILL BE KEPT UP TO DATE ON
INTEGRATION DEVELOPMENTS AND DECISIONS."
- Fred D. Hafer
"WE HAVE AN AMBITIOUS TARGET OF COMPLETING THE INTEGRATION PROCESS EARLY
NEXT YEAR."
- Kevin Keough
"WITH OUR EXPERIENCE FROM THE OHIO EDISON AND CENTERIOR ENERGY MERGER, I
BELIEVE THAT THE INTEGRATION OF THE COMPANIES WILL GO SMOOTHLY."
- Guy Pipitone
<PAGE>
INTEGRATION PROGRAM ORGANIZATION
Integration Steering
Committee
Integration Program
Leader
Kevin Keough
Strategy Track Transition Track
Strategy Transition Manager
Teams Guy Pipitone
Transition Directors
2 from FE / 2 from GPU
Transition Transition
Process Teams Support Teams
