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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: December 11, 1998
MASSACHUSETTS ELECTRIC COMPANY
(exact name of registrant as specified in charter)
Massachusetts 0-5464 04-1988940
(state or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
(508) 389-2000
(Registrant's telephone number, including area code)
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Item 5. Other Events
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On December 11, 1998, Massachusetts Electric Company's
parent, New England Electric System, a Massachusetts business
trust (NEES), The National Grid Group plc, a public limited
company incorporated under the laws of England and Wales with
registration number 2367004 (National Grid) and Iosta LLC, a
Massachusetts limited liability company which is directly and
indirectly wholly owned by National Grid (Iosta), entered into an
Agreement and Plan of Merger, dated as of December 11, 1998 (the
Merger Agreement), providing for a merger transaction among NEES,
National Grid and Iosta. The press release issued in connection
therewith is filed herewith as Exhibit 99, and is incorporated
herein by reference.
Pursuant to the Merger Agreement, Iosta will merge with and
into NEES (the Merger), with NEES being the surviving entity and
becoming a wholly-owned subsidiary of National Grid. The Merger,
which was unanimously approved by the boards of directors of
NEES, National Grid and Iosta, is expected to occur shortly after
all of the conditions to the consummation of the Merger,
including the receipt of shareholder approvals and certain
regulatory approvals, are met or waived. NEES anticipates that
the Merger can be consummated in early 2000.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
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(c) Exhibits
(1) Press Release
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SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this Current Report
on Form 8-K to be signed on its behalf by the undersigned
thereunto duly authorized.
MASSACHUSETTS ELECTRIC COMPANY
s/John G. Cochrane
By _________________________
John G. Cochrane
Treasurer
Date: December 22, 1998
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EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
1 Press Release Filed
herewith
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FOR RELEASE: Dec. 14, 1998
CONTACTS:
NEES NATIONAL GRID
Investors: Investors:
Bob Seega, 508-389-2178 Jill Sherrett
011-44-171-620-9191
Media:
Until 6:00 a.m.: Media:
Susan Stevens, 617-236-5800 x2811 Margaret Stewart
011-44-171-620-9191
After 6:00 a.m.:
Amy Tull, 508-389-3283
NEES AND NATIONAL GRID TO MERGE IN $3.2 BILLION TRANSACTION
WESTBOROUGH, Mass., Dec. 14, 1998 The National Grid Group
plc (LSE:NGG) and New England Electric System (NYSE:NES)
announced today that they have signed a merger agreement under
which National Grid will acquire all of the outstanding shares of
NEES. Under the terms of the agreement, NEES shareholders will
receive $53.75 in cash (subject to upward adjustment) for each
NEES share held. The terms value the equity of NEES at
approximately $3.2 billion and represent a premium of 25% above
the closing price of NEES shares on Dec. 11, 1998.
National Grid is the owner and operator of the England and
Wales high-voltage transmission network, including
interconnectors with Scotland and France. National Grid is the
world's largest privately owned transmission company, and has
almost a decade of experience running a transmission network in a
competitive market. It is listed on the London Stock Exchange
with a market capitalization of $12.4 billion.
NEES will become the base of U.S. operations for National
Grid, and will provide a regional platform for growth in
transmission and distribution.
"For NEES and our employees, this transaction not only keeps
jobs in New England, it represents a tremendous opportunity for
growth as the base of U.S. operations for a large and successful
company. For our customers and the region, it is an opportunity
to benefit from National Grid's proven track record of delivering
high-quality, low-cost transmission service in the competitive UK
market. National Grid's considerable experience should benefit
customers here as the competitive electricity market develops in
the northeast," said Rick Sergel, president and chief executive
officer of NEES.
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"Most important, our customers will continue to receive the
same great service from the same people in the yellow trucks, 24
hours a day; and they will continue to receive rates among the
lowest in the region. The only difference is that we will have
the resources of an international leader behind us," Sergel said.
Commenting on the acquisition, David Jones, chief executive
of National Grid, said: "NEES has a strong reputation for
efficient service to customers, and has already played a
prominent role in the regulatory developments in the region. The
chemistry between the management teams is excellent, and by
combining our expertise with that of NEES, I am confident that as
a group we will be able to deliver on the exciting prospects in
the northeast U.S. and continue to enhance value for National
Grid shareholders."
According to National Grid, the acquisition:
- - represents a significant investment in an efficient, focused
transmission and distribution business with a strong
operational track record, which will benefit further from
National Grid's core skills;
- - enhances National Grid's earnings per share before the
amortization of goodwill and significantly enhances National
Grid's cash flow per share immediately following the
acquisition;
- - provides the right point of entry into the U.S. for National
Grid, given New England's favorable economic climate and its
advanced state of regulatory evolution toward performance-
based regulation;
- - brings National Grid a high-quality management team with
proven distribution expertise and a shared view of the
industry's future development in the northeast U.S.; and
- - provides an excellent regional platform for growth in
transmission and distribution.
Rick Sergel will continue as president and chief executive
officer of NEES and will join the National Grid Board as an
executive director, together with one of NEES's outside
directors. Alfred D. Houston, NEES chairman, will step down upon
the closing of the merger, and will serve as a consultant for two
years. A NEES advisory board will be established for two years.
Upon completion of the acquisition, NEES will become a wholly
owned subsidiary of National Grid. NEES and its subsidiary names
will remain the same. Headquarters for U.S. operations will
remain in Massachusetts, and the strong links forged by NEES with
its local communities in Massachusetts, Rhode Island and New
Hampshire will be maintained, according to National Grid.
The acquisition is subject to a number of regulatory and
other approvals and consents, including approvals by the U.S.
Securities and Exchange Commission, Federal Energy Regulatory
Commission, and Nuclear Regulatory Commission, support from the
states in which NEES operates, and Hart-Scott-Rodino approval.
The acquisition also requires approval by shareholders of both
companies, and is expected to be completed by early 2000.
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NEES shareholders will receive a cash payment of $53.75 for
each share held when the merger is completed. The cash payment
will be subject to an increase if the completion of the merger
does not take place on or before the date following six months
after approval of the merger by NEES shareholders. The amount of
any such adjustment will be determined using a daily accrual rate
of $0.0033 until closing, up to a maximum increase of $0.60 per
share.
Merrill Lynch & Co. served as financial advisor and delivered
a fairness opinion to NEES. Rothschild and Dresdner Kleinwort
Benson are jointly advising National Grid. Dresdner Kleinwort
Benson Securities and HSBC Securities are brokers to National
Grid.
More information on the merger agreement and both companies
is available on the NEES web site at www.nees.com, and the
National Grid web site at www.ngc.co.uk.
NEES is a public utility holding company headquartered in
Westborough, Mass. Its subsidiaries Massachusetts Electric
Company, Narragansett Electric Company, Granite State Electric
Company, and Nantucket Electric Company serve approximately 1.3
million customers in Massachusetts, Rhode Island and New
Hampshire. Unregulated subsidiaries include AllEnergy, an
energy marketing company, and NEESCom, a telecommunications
company.
This document contains statements that may be considered forward
looking under the securities laws. Actual results may differ
materially. For a list of factors that could influence results,
please refer to NEES's Form 10-Q for the period ended Sept. 30,
1998. The transaction is also subject to contingencies as
discussed herein.
