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. _________)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
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)
--------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(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):
N/A
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
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number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
CONTACTS FOR FIRSTENERGY CORP.: CONTACTS FOR GPU, INC.:
MEDIA: MEDIA:
Ralph J. DiNicola Jeff Dennard
330-384-5939 973-401-8333
INVESTORS: INVESTORS:
Kurt E. Turosky Joanne Barbieri
330-384-5500 973-401-8720
FIRSTENERGY CORP. AND GPU, INC.
ANNOUNCE MERGER
Akron, OH, and Morristown, NJ, August 8, 2000 -- FirstEnergy Corp.
(NYSE: FE) and GPU, Inc. (NYSE: GPU) today announced that both companies'
boards of directors have unanimously approved a definitive merger agreement
under which FirstEnergy would acquire all of the outstanding shares of
GPU's common stock for approximately $4.5 billion in cash and FirstEnergy
common stock. FirstEnergy also would assume approximately $7.4 billion of
GPU's debt and preferred stock. The combined company would have an equity
value of approximately $8.5 billion, based upon the closing stock price on
August 4, 2000, of $26.94 per FirstEnergy share.
The transaction would be accounted for as a purchase, and is expected
to be accretive to FirstEnergy's earnings per share and cash flow
immediately upon its completion. The companies expect that the transaction
can be completed within 12 months. Financing for the transaction is
expected to come from a combination of long-term debt and bank credit
lines.
Under the agreement, GPU shareholders would receive the equivalent of
$36.50 for each share of GPU common stock they own, payable in cash or in
FirstEnergy common stock, so long as FirstEnergy's common stock price is
between $24.24 and $29.63. Each GPU shareholder would be able to elect the
form of consideration they wish to receive, subject to proration so that
the aggregate consideration to all GPU shareholders will be 50 percent cash
and 50 percent FirstEnergy common stock. Each GPU share converted into
FirstEnergy common stock would receive not less than 1.2318 and not more
than 1.5055 shares of FirstEnergy common stock, depending on the average
closing price of FirstEnergy stock during the 20-day trading period ending
on the sixth trading day prior to the merger closing. For example, based on
FirstEnergy's closing price of $26.94 on August 4, 2000, GPU shareholders
who choose to receive common stock would receive 1.355 FirstEnergy shares
for each GPU share. The stock portion of the consideration is expected to
be tax free to GPU shareholders. Each GPU share may also be converted into
$36.50 in cash, also subject to proration.
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The combination of FirstEnergy and GPU would create the nation's sixth
largest investor-owned electric system, based on customers served. As of
June 30, 2000, the combined revenues of FirstEnergy and GPU for the
previous 12 months totaled $12.0 billion and assets of the companies
totaled $38.6 billion.
The combined company's principal electric utility operating companies
would include FirstEnergy's Ohio Edison Company and its Pennsylvania Power
Company subsidiary, The Cleveland Electric Illuminating Company, and Toledo
Edison Company, as well as GPU Energy's electric utility operating
companies - Jersey Central Power & Light Company, Metropolitan Edison
Company, and Pennsylvania Electric Company, which serve customers in
Pennsylvania and New Jersey.
Together, these companies serve approximately 4.3 million customers
within 37,200 square miles of Ohio, Pennsylvania and New Jersey. In
addition, the combination would make FirstEnergy's mechanical contracting
and construction business the fourth largest in the nation, with annual
revenues of approximately $1 billion and 3,800 employees.
BENEFITS OF THE MERGER
The merger would provide substantial strategic benefits, including:
o NEAR- AND LONG-TERM FINANCIAL GROWTH - Expected to be accretive to
FirstEnergy's earnings per share and cash flow immediately upon
completion; enhances earnings growth potential; offers substantial
synergies from combining operations; enhances revenue opportunities
o GREATER SCOPE AND SIZE - Gives FirstEnergy the largest customer base
in the PJM Power Pool; creates the nation's sixth largest
investor-owned electric system based on customers; joining the
companies' contiguous transmission and distribution systems doubles
FirstEnergy's customer base in the region it has targeted for its
growth
o ENHANCED GENERATION EFFICIENCY - Provides a significant market for
FirstEnergy's generation capacity; may help contribute to meeting
GPU's "provider-of-last-resort" requirements for electricity customers
in its Pennsylvania and New Jersey service areas
o BROADENED UNREGULATED OPPORTUNITIES - Increases market and growth
opportunities for FirstEnergy's natural gas resources, and both
companies' mechanical contracting and construction,
telecommunications, and e-procurement resources
Peter Burg, chairman and chief executive officer of FirstEnergy, said,
"Joining our companies will enable us to realize our strategic vision of
being the premier retail energy and related services provider in a 13-state
region in the northeastern quadrant of the nation while offering
substantial economic benefits that should grow both our top- and
bottom-lines."
Mr. Burg said, "By doubling the retail customer base and leveraging
both companies' customer relationships, we will be able to maximize the
utilization of our existing energy and related resources. Those resources
include electricity from our more than 12,000 megawatts
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<PAGE>
of generating capacity; natural gas from our exploration and production
operations; fiber optics and long-distance phone service from our
telecommunications operations; and a wide range of energy-related services
from our network of mechanical contracting and construction companies."
Mr. Burg continued, "This merger will provide outstanding value to
both companies' shareholders. We believe it offers immediate earnings and
cash-flow accretion, enhanced earnings growth potential, a greater
diversity to earnings and a more competitive cost structure. Our
combination will provide shareholders and customers with more value and
employees with better opportunities than either company could have achieved
on a stand-alone basis."
Fred D. Hafer, chairman, president and chief executive officer of GPU,
said, "This is an extraordinary transaction for our shareholders and all of
our other constituents. FirstEnergy is the right fit for us in terms of its
strategic objectives, our culture and values, our locations and our
systems. Our access to FirstEnergy's generation and its expertise in
providing cost-effective supply options in competitive markets will be a
tremendous advantage in GPU's efforts to accommodate customers who rely on
us for their supply of electricity. Our merger will provide other important
benefits, including increased ownership in two exciting ventures already
underway - America's Fiber Network, which is positioned to reach about 35
percent of the national wholesale communications market, and Pantellos
Corporation, which will operate an Internet-based, e-marketplace for the
purchase of goods and services between the energy industry and its
suppliers."
Mr. Hafer added, "Through FirstEnergy, we will continue to play an
important role in the economic health and well-being of New Jersey and
Pennsylvania, both as a significant employer and as a responsible corporate
citizen. We will continue the strong traditions of both companies for
supporting local communities through charitable contributions and through
the extensive volunteerism of employees."
SYNERGIES FROM THE MERGER
FirstEnergy and GPU expect cost savings from the merger to be
approximately 5 percent of combined annual non-generation operations and
maintenance expenses. Savings are expected to come from the elimination of
duplicative activities, improved operating efficiencies, more efficient use
of generation assets and the combination of the companies' work forces. The
companies would seek to minimize the effects of work-force reductions
through hiring limits, attrition and separation programs. All labor
agreements would be honored. The companies also expect to continue ongoing
efforts to improve efficiencies and reduce costs, as well as GPU's
previously announced divestiture program for certain of its international
assets.
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In addition, the companies expect to achieve revenue growth from the
combination of their mechanical contracting and construction operations;
increased electricity, natural gas and telecommunications sales in
unregulated markets; and expansion of other business opportunities in the
region.
DIVIDEND AND STOCK REPURCHASE PROGRAMS
The combined company expects to maintain FirstEnergy's current annual
dividend of $1.50 per share of common stock.
In addition, FirstEnergy plans to continue its program to repurchase
common stock. To date, FirstEnergy has repurchased 9.9 million shares of
the authorized 15 million shares in a three-year program ending in 2001.
GPU has repurchased approximately $300 million worth of common stock in its
$350 million repurchase program.
MANAGEMENT, BOARD AND HEADQUARTERS
Fred D. Hafer, 59, would become chairman of FirstEnergy until his
retirement at age 62. Peter Burg, 54, would become vice chairman and remain
chief executive officer of FirstEnergy. He would also lead a merger
integration team that will soon be formed.
FirstEnergy's Board of Directors would consist of 10 members from
FirstEnergy's current Board and 6 from GPU's Board.
After the combination, FirstEnergy would remain headquartered in
Akron, Ohio, but certain corporate functions may remain in New Jersey. It
is anticipated that the electric utility operating companies would retain
their names and their principal offices would remain at their current
locations.
APPROVALS AND TIMING
The transaction is conditioned, among other things, upon the approval
of each company's shareholders and various regulatory agencies, including
the Federal Energy Regulatory Commission, the Nuclear Regulatory
Commission, the Federal Communications Commission, and the Securities and
Exchange Commission (SEC), as well as any approvals in Ohio, Pennsylvania
and New Jersey that may be needed to complete the merger. FirstEnergy
expects to register as a holding company with the SEC under the Public
Utility Holding Company Act of 1935. The companies expect that the merger
can be completed within 12 months.
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<PAGE>
Morgan Stanley Dean Witter is serving as financial advisor to
FirstEnergy, and Salomon Smith Barney is serving as financial advisor to
GPU. Winthrop, Stimson, Putnam & Roberts is serving as legal advisor to
FirstEnergy; and Fried, Frank, Harris, Shriver & Jacobson is serving as
legal advisor to GPU.
COMPANY BACKGROUND
FirstEnergy Corp., a diversified energy services holding company
headquartered in Akron, Ohio, was formed in 1997 as the result of the
merger of Ohio Edison Company and Centerior Energy Corporation. FirstEnergy
companies provide electricity and natural gas services and a wide array of
energy-related products and services. FirstEnergy's four electric utility
operating companies serve 2.2 million customers in a 13,200-square-mile
service area in northern and central Ohio and western Pennsylvania and form
the nation's tenth largest investor-owned electric system, based on total
assets.
GPU, Inc., headquartered in Morristown, New Jersey, is a registered
public utility holding company providing utility and utility-related
services to customers throughout the world. GPU Energy serves 2.1 million
customers directly through its electric companies in the United States. GPU
also serves 2.7 million international customers in the United Kingdom,
Argentina and Australia. GPU's independent power project business units own
interests in and/or operate 14 projects in 5 countries including the United
States. GPU's other subsidiaries include MYR Group, Inc., GPU Advanced
Resources, Inc., GPU International, Inc., GPU Nuclear, Inc., GPU Service,
Inc. and GPU Telcom Services, Inc.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This press release 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
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<PAGE>
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, New Jersey 07962, Telephone: 1-973-401-8204.
FirstEnergy, its directors, certain executive officers, and certain other
employees (Thomas M. Welsh, manager of Communications, and Kurt E. Turosky,
manager of Investor Relations) may be deemed under the rules of the SEC to
be "participants in the solicitation" of proxies from the security holders
of FirstEnergy in favor of the merger. FirstEnergy's directors and
executive officers beneficially own, in the aggregate, less than 1% of the
outstanding shares of FirstEnergy common stock. Security holders of
FirstEnergy may obtain additional information regarding the interests of
the "participants in the solicitation" by reading the joint proxy
statement/prospectus relating to the merger when it becomes available.
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.
www.firstenergycorp.com
www.GPU.com
<PAGE>
FRED HAFER'S REMARKS TO
EMPLOYEES
AUGUST 8, 2000
<PAGE>
Fred Hafer - Employee Broadcast Remarks
Good morning and thanks for joining us at this early hour. My remarks today
will not be a typical "State of the Company" address. At this moment, we
are releasing to the news media an announcement of our intent to merge with
FirstEnergy Corp., based in Akron, Ohio. GPU's board approved this move
yesterday, after making the determination this was in the best interest of
GPU, including its shareholders, customers and employees.
I am very confident that this is an extremely positive move for GPU.
FirstEnergy is the nation's 10th largest investor-owned electric system.
Its principal electric utility operating companies include Ohio Edison
Company, Pennsylvania Power Company, The Cleveland Electric Illuminating
Company, and Toledo Edison Company.
The combined company will have estimated revenues of $11.9 billion, 4.3
million customers, and a 37,200-square-mile service area, giving us the
necessary size and strength to be successful in the energy industry.
I know you have heard rumors over the last few weeks about our interest in
pursuing such opportunities. This is the real thing. The merger with
FirstEnergy will ensure that we are part of a substantial company that can
stand on its own feet and grow.
o During this broadcast we'll provide you with as much information as
possible about why we merged, how the merger will happen, and what
this means for you. But first let me emphasize that this merger is not
an indication of our shortcomings as a business, but rather proof of
our potential future growth and success. I am proud of the efforts and
progress we've made and am convinced we will be a stronger contender
in the new deregulated world as a key part of FirstEnergy.
The reality for utilities today is the need to consolidate or lose control
of their own destiny. The industry landscape and rules have changed
significantly in the last 12 months. There are a few big players and a
number of smaller players. With this kind of fragmentation, consolidation
is inevitable. Winners will be those who have mass and strength. Given the
rapidly changing deregulated world, we could not ignore the compelling
business rationale for merging as a secondary partner.
You all know that our plan has been to remain independent and seek
acquisitions. We pursued numerous opportunities to acquire other companies,
but could not reach agreement with interested targets who met our
specifications for a merger partner. We also were approached by companies
who wanted to combine with us. No company other than FirstEnergy had the
right fit. We felt that such situations would be unpleasant at best, and
potentially would have a negative impact on our business long term.
While this may come as a surprise to many of you, this move is very
consistent with GPU's business strategy to build our infrastructure,
improve our delivery of services, and grow our nonregulated businesses.
FirstEnergy is the right fit for us in terms of our strategic objectives,
our culture and values, our locations, and our systems. We both strongly
value our people and our communities, and have a strong customer focus.
This move is the closest thing to growing organically.
o We both are committed to growth in nonregulated businesses, including
construction and telecommunications. A FirstEnergy subsidiary is the
leading mechanical contractor in the Midwest with 11 mechanical
construction, contracting and energy management companies. FirstEnergy
Telcom builds, operates and controls telecommunications systems, and
has ownership in a long-distance phone company.
o We share borders. By combining our territories, we will create a
contiguous service area of more than 37,000 square miles from Northern
and Central Ohio, through Pennsylvania, to New Jersey.
o Most importantly, we strongly value our people and our communities. A
key aspect of our negotiations involved what is called "social
issues." This means we spent a fair amount of time discussing how we
will handle our responsibility to our employees and communities going
forward. By comparison, most negotiations focus primarily on the
financial and legal aspects of the transaction.
So exactly what is this deal? It is not a simple transaction. You may hear
it described by analysts or the media as a merger or an acquisition. In
reality, the deal falls between the two. As a merger, this is a combination
of companies where GPU has had significant input into the terms of the
transaction and a number of people will be involved in creating what the
new organization will look like going forward. It may look like an
acquisition because FirstEnergy is larger and is paying our shareholders a
premium. Perhaps the best way to characterize the deal is that we are
operating in a spirit of partnership.
We hope to complete the merger by mid 2001.
During this period of time, a transition process will be implemented to
integrate the two organizations. A Transition Management Steering Committee
will oversee the transition. I will serve on this committee as Vice Chair,
along with Peter Burg, CEO of FirstEnergy, Carole Snyder and two other
executives from FirstEnergy. The committee will serve as a conduit for the
flow of information between the two companies and their subsidiaries;
develop regulatory plans and proposals, corporate organizational and
management plans, and workforce combination proposals; and evaluate and
recommend the best way to organize and manage the new company. People
representing both organizations will serve on transition teams to review
practices from each company and recommend the best practices going forward.
This process will enable people to begin working together, facilitating
integration after the merger is completed.
Following the merger, the stock will be traded under FirstEnergy's name.
GPU subsidiaries will operate as subsidiaries of FirstEnergy. The GPU
Energy name will be retained, and added to the name will be "a FirstEnergy
company." I will serve as Chairman of FirstEnergy until I retire at age 62.
Peter Burg will become Vice Chairman and remain as CEO of FirstEnergy. The
headquarters of the new entity will be located in Akron, Ohio, with a
significant presence in Pennsylvania and a continued executive and
operating presence in New Jersey.
Mike Chesser, CEO and president of GPU Energy, will remain in his role.
GPUE will continue to be headquartered in Reading. Other business units
will continue to operate in their current locations through the merger
completion; their locations and operations will be reviewed during the
transition process. Corporate functions identified during the transition
process as necessary for the future company will be moved to Akron.
The combined company will enable us to build off of GPU's current
activities and strengths. GPUE will continue to emphasize its goal to be a
world-class regulated delivery business, and will keep moving forward with
implementation of its new strategy and planned restructuring. The merger
will enhance our ability to grow our current nonregulated businesses,
including MYR, Advanced Resources and Telcom. While FirstEnergy does not
have an international presence, they are open to growing outside the United
States through our international operations.
In a few minutes, I will introduce to Peter Burg, CEO of FirstEnergy, who
will give you more detail about FirstEnergy and why they were attracted to
GPU.
Clearly one of the main reasons why FirstEnergy was attracted to GPU is our
people. Thanks to your focus on customers and dedication to delivering
superior service, we have built a successful organization. For this reason,
both companies are committed to making a significant number of substantive
positions available to GPU employees.
The combined company will need most of the resources available in both
companies and is dedicated to retaining valuable talent. There will be many
new and significant job opportunities available to GPU employees, although
the specifics of these will not be known immediately.
However, where there are duplicate roles and services, we will need to make
decisions during the transition process about how to select those needed
for the future of the business. One of our primary concerns in our
negotiations was to ensure the best outcome for our people, whether they
stay with or leave the combined company. As a result, GPU will have
substantial input in determining the selection process. The criteria for
selecting non-bargaining unit employees from both companies will include
previous work history, job experience and qualifications. Decisions about
jobs and the selection process will be communicated as soon as possible.
Once the merger is completed some employees may be asked to move. These
employees will be provided financial assistance and relocation services for
their moves. For those who are not offered a position in the combined
company, or who choose not to relocate, GPU will establish an Employee
Merger Transition Program. This program will provide financial protection,
medical, dental and life insurance, and outplacement services for a
specified period of time for employees who do not join the combined
company. Details of this program will be communicated shortly.
While we don't have answers to most of your questions about how the merger
will impact you, we are committed to providing information as soon as it is
known. In the interim, we will let you know the process and/or the
timeframe for getting answers to your questions.
At this time, I'd like to introduce Peter Burg, CEO of FirstEnergy. Peter
is highly regarded in the utility industry. In the short time that we've
been meeting about this transaction, we've learned that there are many
similarities between our companies and that we have a great deal to learn
from one another. I want to thank Peter for coming to GPU for this
broadcast. I think you will like to hear what he has to say about our new
company and his thoughts about our potential together.
-----------------------------------------------------------------------------
Given what you've just heard from Peter, the combination of GPU and
FirstEnergy is clearly a strong move. However, we must remain focused on
delivering superior customer service during the transition period so we can
move forward if our merger doesn't receive the necessary regulatory
approvals. In any event, the merger process can be very distracting, which
can be harmful to our business. So it is imperative over the next several
months for all of us to focus on our number one priority of delivering
superior customer service.
For those in GPU Energy, and anyone else who is interested, Mike Chesser
will continue on this broadcast to provide a few comments on what this
means for GPUE's business. After this broadcast we invite you to
participate in discussions about the merger with the senior leader in your
site or function. At this session, you will receive an information packet
providing an overview about this announcement. For those in Corporate,
Carole Snyder will hold an open discussion in the cafeteria at 11 a.m. and
4 p.m.
I know you will have many questions about this announcement. Unfortunately,
we won't be able to answer all of your questions because we simply don't
have a lot of answers at this time. I know this will be frustrating, as it
is for us because we believe in openness. Our intent and desire is to
provide you with as much information as soon as it is available and
possible to communicate. We are committed to keeping you informed as to the
progress of this merger and the impact it may have on you to the best of
our ability.
Now for your immediate questions. Who wants to start?
<PAGE>
Frequently Asked Questions
August 8, 2000
<PAGE>
FREQUENTLY ASKED QUESTIONS (FAQS)
We are committed to keeping you informed as to the progress of this merger
and the impact it may have on you. However, communications about the merger
will be limited due to the lack of available information at this time. We
have established a process for collecting questions and communicating
responses. Our intent and desire is to provide as much information as soon
as it is available and possible to communicate.
ABOUT THE MERGER
1. WHY MERGE WITH FIRSTENERGY CORP.?
The industry landscape and rules have changed significantly in the last 12
months. There are a few big players and a number of smaller players. With
this kind of fragmentation, consolidation is inevitable.
The merger is consistent with GPU's business strategy to build our
infrastructure, improve our delivery of services, and grow our nonregulated
businesses. While our plan has been to retain our independence and seek
acquisitions, FirstEnergy provides the right fit for GPU in terms of our
strategic objectives, our culture and values, and our locations and
systems.
The new combination will provide exciting business advantages structurally,
geographically and financially. GPU could not ignore the compelling
business rationale for merging as a secondary partner. Our goal now is to
integrate and maximize the strengths of both organizations, becoming a
formidable presence in the industry.
2. HOW WILL THE NEW COMPANY BE STRUCTURED?
As of now, many of the structural issues have not been decided. The
following is known: GPU subsidiaries will operate as subsidiaries of
FirstEnergy. The GPU Energy name will be retained, and added to the name
will be "a FirstEnergy company." The headquarters of the new entity will be
located in Akron, Ohio, with a significant presence in Pennsylvania and a
continued executive and operating presence in New Jersey. GPUE will
continue to be headquartered in Reading. Other business units will continue
to operate in their current locations through the merger completion; their
locations and operations will be reviewed during the transition process.
Corporate functions identified during the transition process as necessary
for the future company will be moved to Akron.
3. WHO WILL RUN THE NEW COMPANY?
Fred Hafer will serve as Chairman of FirstEnergy until he retires at age
62. Peter Burg will serve as Vice Chairman and CEO of FirstEnergy. Mike
Chesser, CEO and president of GPU Energy, will remain in his role.
4. HOW WILL THE MERGER AFFECT GPUE'S PLANNED RESTRUCTURING?
GPUE will continue to emphasize its goal to be a world-class regulated
delivery business, and will keep moving forward with implementation of its
new strategy and planned restructuring.
5. HOW LONG WILL IT TAKE TO COMPLETE THE MERGER?
GPU and FirstEnergy expect to complete the merger by mid 2001. The actual
process could take as little as nine months and as long as 18 months,
depending on regulatory approval.
6. HOW WILL THE COMPANIES OPERATE DURING THIS PERIOD?
Until the merger is complete, the two companies will operate independently.
During this period of time, a transition process will be implemented to
integrate the two organizations. A Transition Management Steering Committee
will oversee the transition. Members will include Peter Burg, CEO of
FirstEnergy, and Committee Chair, Fred Hafer, Committee Vice Chair, Carole
Snyder, and two other executives from FirstEnergy. The committee will serve
as a conduit for the flow of information between the two companies and
their subsidiaries; develop regulatory plans and proposals, corporate
organizational and management plans, and workforce combination proposals;
and evaluate and recommend the best way to organize and manage the new
company. People representing both organizations will serve on transition
teams to review practices from each company and recommend the best
practices going forward. This process will enable people to begin working
together, facilitating integration after the merger is completed.
ABOUT EMPLOYEES
7. HOW WILL THE MERGER BENEFIT EMPLOYEES?
A larger customer base creates a larger enterprise with more resources to
meet the challenges of a changing electric utility industry. The new
organization will need talented employees to provide customers with
high-quality electric service and enhance the value of our shareholders'
investments. Over the long term, that means better career opportunities and
added responsibilities for more employees than would have been possible had
our companies remained separate.
8. WHAT IS THE PROCESS FOR SELECTING WHO WILL STAY?
The combined company will need most of the resources available in both
companies and is dedicated to retaining valuable talent. Where there are
duplicate roles and services, however, decisions will be made during the
transition process about how to select those needed for the future of the
business. GPU and FirstEnergy have agreed that the criteria for selecting
non-bargaining unit employees from both companies for employment by the new
company will include previous work history, job experience and
qualifications. There will be many new and significant job opportunities
available to GPU employees, although the specifics of these will not be
known immediately. Decisions about jobs and the selection process will be
communicated as soon as they are known.
9. HOW WILL THE MERGER AFFECT LABOR AGREEMENTS?
Our labor agreements have a successor clause that is binding, and will be
honored.
10. WILL EMPLOYEES HAVE TO RELOCATE? WHAT SUPPORT WILL THEY GET?
Once the merger is completed some employees may be asked to move. These
employees will be provided financial assistance and relocation services for
their moves. For those who choose not to relocate, GPU will establish an
Employee Merger Transition Program. This program will provide financial
protection, medical, dental and life insurance, and outplacement services
for a specified period of time for employees who do not join the combined
company. Details of this program will be communicated shortly.
11. WHAT WILL TERMINATED EMPLOYEES BE OFFERED?
GPU will establish an Employee Merger Transition Program. This program will
provide financial protection, medical, dental and life insurance, and
outplacement services for a specified period of time for employees who do
not join the combined company. Details of this program will be communicated
shortly.
ABOUT SHAREHOLDERS
12. HOW WILL THE MERGER BENEFIT SHAREHOLDERS?
Shareholders will benefit from owning a larger company with more resources
to meet the challenges of the energy industry.
13. WILL SHAREHOLDERS VOTE ON THE MERGER?
Yes. The merger will require approval of GPU's shareholders.
14. HOW WILL THE MERGER AFFECT DIVIDENDS?
The dividend is expected to stay the same.
15. HOW WILL THE COMPANIES' STOCK TRADE BEFORE THE TRANSACTION IS COMPLETED?
The companies' stock will trade independently before completion of the
transaction. Following the merger, the stock will be traded under
FirstEnergy's name. The companies intend to send their shareholders a proxy
and a proxy statement detailing the proposed transaction and to hold
special meetings of their shareholders to vote on the merger by the end of
the year. The process of obtaining regulatory approval of the merger could
take between nine and 18 months. We will keep shareholders informed during
this process.
16. DO STOCKHOLDERS HAVE TO DO ANYTHING NOW?
No. When we send the proxy material later in the year, we ask that you read
the enclosed information, complete the enclosed proxy form, and mail it as
soon as possible. Not returning the proxy card will have the same effect as
voting against the merger because unvoted shares cannot be counted.
17. WILL COMMON STOCK CERTIFICATES HAVE TO BE TURNED IN?
Yes. We will ask for stock certificates when the merger is completed.
ABOUT CUSTOMERS
18. HOW WILL THE MERGER AFFECT CUSTOMERS?
Customers will benefit from being served by a larger organization with more
resources to provide better service at more competitive prices, as well as
a wider array of energy-related products and services, in the years ahead.
ABOUT FINANCES AND LEGAL PROCEDURES
19. WHAT KIND OF REGULATORY PROCEDURES WILL THIS TRANSACTION REQUIRE?
The merger requires the approval of each company's shareholders and various
regulatory agencies, including the Federal Energy Regulatory Commission,
the Nuclear Regulatory Commission, and the Securities and Exchange
Commission. State approvals will be needed as required in Ohio, New Jersey
and Pennsylvania.
<PAGE>
<TABLE>
<CAPTION>
FIRSTENERGY AND GPU: FACTS AT A GLANCE
--------------------------------------
<S> <C> <C> <C>
PERIOD ENDED JUNE 30, 2000 FIRSTENERGY GPU NEW FIRSTENERGY
U.S. Customers 2.2 million 2.1 million 4.3 million
International Customers 0 2.7 million 2.7 million
Total Customers 2.2 million 4.8 million 7.0 million
U.S. Electric Utility Employees 9,800 4,900 14,700
U.S. Non-Electric Utility Employees 3,500 400* 3,900
International Employees 0 4,664 4,664
Total Employees 13,300 10,830 24,130
U.S. Service Area (Square Miles) 13,200 24,000 37,200
U.S. Generating Capacity (MW) 12,071 496 (equity) 12,567
International Generating Capacity 0 1,557 (equity) 1,557
Total Capacity 12,071 2,053 (equity) 14,124
U.S. Peak Load (MW) 12,713 9,816 22,529
U.S. Capacity Factor 66.7% N/A
U.S. Transmission Line Miles 8,752 6,000 14,752
U.S. Transmission Interconnections 37 66 103
U.S. Distribution Line Miles 55,932 62,000 117,932
U.S. Transmission Substations 122 102 224
U.S. Distribution Substations 628 942 1,570
<CAPTION>
FINANCIAL HIGHLIGHTS
12 MONTHS ENDED JUNE 30, 2000
<S> <C> <C> <C>
Revenues $6.7 billion $5.3 billion $12.0 billion
Net Income $582 million $431 million**
Earnings Per Share $2.58 $3.52**
Current Annual Dividends Per Share $1.50 $2.18
Common Shares Outstanding 228.6 million 122.9 million
Capital Expenditures $717 million $541 million $1.3 billion
U.S. Kilowatt-hours Sold 70.8 billion 45.3 billion 116.1 billion
<CAPTION>
FINANCIAL HIGHLIGHTS
AT JUNE 30, 2000
<S> <C> <C> <C>
Total Assets $18.1 billion $20.5 billion $38.6 billion
Total Common Equity $4.6 billion $3.2 billion
Book Value Per Share $20.67 $26.99
Closing Price (8/4/00) $26.94 $28.06
* Approximate figure excludes contract union employees
**Normalized
</TABLE>
<PAGE>
GPU
QUESTIONS AND RESOURCES
August 8, 2000
<PAGE>
Questions & Resources
Because many details are not known at this point, a number of questions may
not be announced for some time. We are making every effort to get answers
to your questions. Every question will be posted on the merger web-site,
most likely with one of three responses:
o Here is the answer...
o We don't know yet, but here is the process...
o We don't know, but we are working on the process...
All questions that aren't answered through one of these resources will go
to a control coordination point. As soon as answers are available they will
be posted on the merger site.
GPU has established resources to help you throughout the merger:
o "Important merger information" on our intranet is dedicated to
providing you with current information, including press releases and
frequently asked questions updated on a weekly basis.
o Your site or functional leader.
o A chat room will be open today from 2:00 p.m. until approximately 3:00
p.m.; these will be held periodically.
o Further updates in issues of Connect!
o In the future we plan to have a periodic joint newsletter so employees
of both companies receive the same up-to-date information.
o The HR Help Desk representatives will not have information about the
merger at this time. However, once details about employee programs are
available, representatives will be able to answer questions.
