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
June 20, 1999
(Date of earliest event reported)
K N Energy, Inc.
(Exact name of Registrant as specified in its charter)
Kansas 1-6446 48-0290000
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
370 Van Gordon Street
P. O. Box 281304
Lakewood, Colorado 80228-8304
(Address of principal executive offices, including zip code)
(303) 989-1740
(Registrant's telephone number, including area code)
Item 5. Other Events.
Termination of Agreement to Merge with Sempra Energy
----------------------------------------------------
On June 21,1999, K N Energy, Inc., a Kansas corporation (the
"Company"), and Sempra Energy, a California corporation ("Sempra"),
announced in a joint press release that they had agreed to terminate the
Agreement and Plan of Merger (the "Merger Agreement"), dated as of February
20, 1999, among Sempra, Cardinal Acquisition Corp., a California
corporation, and the Company. The joint press release is attached as
Exhibit 99.1 and is incorporated by reference herein.
The Company also issued a press release addressing its future
direction as a stand-alone company following the termination of the Merger
Agreement. This press release is attached as Exhibit 99.2 and is
incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits.
99.1 Joint Press Release of the Company and Sempra,
issued June 21, 1999.
99.2 Press Release of the Company, issued June 21,
1999.
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.
K N Energy, Inc.
By: /s/ Martha B. Wyrsch
--------------------
Name: Martha B. Wyrsch
Title: Vice President,
General Counsel and
Secretary
Date: June 21, 1999
EXHIBIT INDEX
99.1 Joint Press Release of the Company and Sempra, issued June 21,
1999.
99.2 Press Release of the Company, issued June 21, 1999.
Media Contacts: Doug Kline Analyst Contacts: Clem Teng
Sempra Energy Sempra Energy
(860) 877-2066 (877) 736-7727
www.sempra.com
Larry Pierce Steven P. Eshbach
K N Energy K N Energy
(303) 914-4751 (303) 763-3618
www.kne.com
NEWS
SEMPRA ENERGY AND K N ENERGY
TERMINATE MERGER AGREEMENT
SAN DIEGO and LAKEWOOD, Colo., June 21, 1999 -- Sempra Energy
(NYSE:SRE) and K N Energy, Inc. (NYSE:KNE) today announced that they have
mutually agreed to terminate their merger agreement, announced Feb. 22,
1999.
Sempra Energy and K N Energy indicated that, as they worked
through the integration process, it became clear that the combined company
would not be able to realize the business objectives that they originally
anticipated. As a result, Sempra Energy and K N Energy agreed that it was
more prudent for both companies to pursue their business objectives
individually.
In connection with the termination, Sempra Energy and K N Energy
entered into a confidential termination and release agreement on June 20,
1999, whereby they have agreed to release each other from any claims
relating to the proposed merger, to refrain from soliciting the employees
of one another for a two-year period, and to refrain from acquiring any
stock of or making any proposals to acquire the other party for a
three-year period. In addition, in order to amicably terminate the
transaction, Sempra Energy agreed to reimburse K N Energy for a portion of
its expenses incurred in connection with the proposed merger in the amount
of $5.95 million.
- more -
Sempra Energy and K N Energy Terminate Merger Agreement/Page 2
K N Energy, Inc., based in Lakewood, Colorado, is the nation's
sixth-largest integrated natural gas company with more than $8 billion in
total assets and is one of the largest pipeline operators with more than
25,000 miles of pipe. It has operations in 16 states, including natural gas
gathering, processing, marketing, storage, transportation, energy commodity
sales -- natural gas and natural gas liquids; electric generation design,
construction and operation; and innovative services designed for consumers,
utilities and commercial entities.
Sempra Energy, based in San Diego, is a Fortune 500 energy
services holding company with 12,000 employees, revenues of $5.5 billion
and more than 6 million natural gas and electric meters serving 21 million
customers. Through its eight principal subsidiaries -- Southern California
Gas Company, San Diego Gas & Electric, Sempra Energy Trading, Sempra Energy
Solutions, Sempra Energy International, Sempra Energy Resources, Sempra
Energy Utility Ventures and Sempra Energy Financial -- Sempra Energy
provides a broad range of energy-related products and services. The company
has operations throughout the United States, Canada, Mexico and Latin
America.
# # #
[GRAPHIC OMITTED]
FOR IMMEDIATE RELEASE CONTACT: Sara Hansen Steven P. Eschbach
Media Relations Investor Relations
(303) 914-4649 (303) 763-3618
[email protected] [email protected]
KN ENERGY AGREES TO TERMINATE MERGER,
OUTLINES STRATEGIC GROWTH AND EARNINGS OUTLOOK
LAKEWOOD, Colo., June 21, 1999 - KN Energy, Inc. (NYSE - KNE)
announced today it has jointly agreed with Sempra Energy (NYSE - SRE) to
terminate their merger agreement, which was announced February 22, 1999.
The companies mutually entered into a confidential termination agreement on
Sunday, June 20.
According to KN Energy Chairman and Chief Executive Officer Larry D.
Hall, the two companies would not be able to realize the business
objectives that they originally anticipated. As a result, Sempra Energy and
KN Energy agreed that it was more prudent for both companies to pursue
their business objectives individually.
"Our goal is to create value for our customers and shareholders
moving forward with KN as a stand-alone company," Hall said. "The
number-one priority for the senior management team and all of KN's
employees is to execute a strategy that enables our company to deliver the
kind of results our stakeholders have come to expect from us."
NEAR-TERM OUTLOOK
"We have sharpened our focus and engaged in some capital
reallocation planning, which will serve us well moving forward as we focus
on improving operations efficiencies, managing capital expenses and
investing in projects that will position KN for long-term earnings growth,"
Hall continued.
Hall outlined six key factors that he said allow KN Energy, one of the
nation's largest pipeline operators, to operate from a position of strength
moving forward:
o A strategically located asset base, giving KN dominant access to most
of the major natural gas supply basins, as well as to major demand
markets in the country. This is a key strength given the industry's
projections of a 30 Tcf market by 2010.
o One of the best-balanced storage positions in the nation, enabling the
company to help manage volatility of seasonal demand and meet the needs
of a converging marketplace.
o Strong growth opportunities off the midstream assets, including
gas-fired generation projects and new pipeline projects such as the
company's Horizon project to take gas into Wisconsin.
o The cash flow to meet our obligations and to invest in future growth
opportunities.
o A well-disciplined marketing company capable of capitalizing on
volatile markets, maximizing improving market fundamentals and
optimizing returns across the value stream.
o A commitment to refining performance goals and work processes, and
continued growth and development of its talented workforce.
"Our strong asset base offers excellent growth opportunities," Hall
said. "It has long been KN's strategy to use our strategic midstream asset
base to create unregulated opportunities in our upstream and downstream
businesses."
Moving forward, the company said it would fund growth projects with
proceeds from the sale of non-performing or non-strategic assets and by
establishing a series of partnerships and/or joint ventures with other
companies.
"These partnerships, bringing both capital and expertise to complement
our core competencies, remain our approach to financing our gas-fired
electric generation projects," Hall said.
EARNINGS OUTLOOK
Preliminary estimates indicate the company will experience a loss of
$0.20-$0.25 per share in the second quarter, and the company will likely
break even or post a modest gain of $0.10 per share for the year. These
projections exclude gains on the sale of non-strategic and unprofitable
assets designed to strengthen the company's balance sheet and provide a
more solid footing for future earnings growth.
Assuming a return to normal weather, improvement in basis
differentials, and continued increase in reserve development in supply
regions connected to KN's pipeline assets, the company estimates earnings
for the year 2000 to be in the range of $.70 to $.90 per share.
Continued lack of demand for interstate natural gas transportation
in KN Energy's key markets, coupled with weak basis differentials -
by-products of two consecutive record warm winters, increased competition
in KN's midwest markets and delayed supply development in Rocky Mountain
and Gulf Coast regions - contributed to these projected results. In the
last two years, the Midwest experienced the second and third warmest
winters of the last 39 years.
These negative factors have a lingering impact on KN, and company
officials said it could be six months to12 months before the company begins
to reflect improving market conditions.
While natural gas liquids prices are improving, rising natural gas
prices have limited processing margin improvement. This will result in only
modest improvement in KN Energy's upstream business segment for the rest of
1999.
"We understand what our challenges are, and I want to assure each
and every KN stakeholder that I am personally committed to meeting their
high expectations of this company," Hall said. "I have charged senior
management with accepting nothing less than positive earnings results
moving forward, and we are focused on maximizing the value of our
businesses and recapturing the confidence our stakeholders have placed in
our abilities over the years."
KN Energy, Inc., based in Lakewood, Colo., is the nation's
sixth-largest integrated natural gas company with more than $8 billion in
total assets and is one of the largest pipeline operators with more than
25,000 miles of pipe. It has operations in 16 states, including natural gas
gathering, processing, marketing, storage, transportation, energy commodity
sales --natural gas and natural gas liquids; electric generation design,
construction and operation; and innovative services designed for consumers,
utilities and commercial entities. It also jointly owns en.able, which
markets the Simple ChoiceSM brand of enhanced products and services for
consumers through their local utilities.
###
This news release contains forward-looking statements within the
scope of the Securities Act of 1933 and the Securities Exchange Act of
1934. Although the company believes that these statements are based upon
reasonable assumptions, it can give no assurance that its goals will be
achieved. Differences between assumed facts and actual results can be
material depending on the circumstances and investors should be aware of
important factors that could have a material impact on future results. Such
factors include, among others, the pace of deregulation of retail natural
gas and electricity; federal, state and international regulatory
developments; the timing and extent of changes in commodity prices for oil,
natural gas, natural gas liquids, electricity, certain agricultural
products and interest rates; the extent of success in acquiring natural gas
facilities; the timing and success of efforts to develop power, pipeline
and other projects; political developments in foreign countries;
weather-related factors; and conditions of the capital markets and equity
markets during the periods noted in the release. All of these factors are
difficult to predict and many are beyond the company's control.
