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File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NEW ENGLAND ELECTRIC SYSTEM
(Name of company filing this statement)
25 Research Drive
Westborough, Massachusetts 01582
(Address of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent of applicant)
John G. Cochrane Kirk L. Ramsauer
Treasurer Deputy General Counsel
25 Research Drive 25 Research Drive
Westborough, Massachusetts 01582 Westborough, Massachusetts 01582
(Names and addresses of agents for service)
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New England Electric System (NEES), a Massachusetts business trust and a
registered holding company under the Public Utility Holding Company Act of
1935, as amended (the Act), hereby files this Form U-1 Declaration (the
Declaration) for the purpose of obtaining approval to amend its Agreement and
Declaration of Trust (the Trust Agreement) and to solicit the proxies of the
holders of common shares of NEES.
Item 1. Description of Proposed Transaction
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NEES has entered into an Agreement and Plan of Merger, dated as of
December 11, 1998 (the Merger Agreement) with The National Grid Group plc, a
public limited company incorporated under the laws of England and Wales
(National Grid) and Iosta LLC, a Massachusetts limited liability company which
is directly and indirectly wholly owned by National Grid (Iosta). Iosta
changed its name to NGG Holdings LLC (NGG Holdings) subsequent to the
execution of the Merger Agreement. On the closing date, NGG Holdings would
merge with and into NEES (the Merger). NEES would be the surviving entity and
a wholly owned subsidiary of National Grid. On December 14, 1998, NEES and
National Grid jointly issued a press release announcing the proposed merger
and related information, a copy of which is attached as Exhibit B-2. This
proposed merger will require Commission approval under the Act; a separate
filing for such approval will be made during the first quarter of 1999.
Pursuant to the terms of the Merger Agreement, NEES has agreed to
convene a meeting of its shareholders for the purpose of obtaining required
shareholder approvals related to the Merger. In addition, NEES will seek to
obtain shareholder approval for an amendment to its Trust Agreement. The
Amendment would allow (1) a Massachusetts limited liability company, like NGG
Holdings, to be merged into NEES in accordance with Massachusetts General
Laws, Chapters 156C and 182; and (2) shareholders not consenting to a merger
with a limited liability company to be given the same appraisal rights as
stockholders of a Massachusetts business corporation. The Amendment will be
effected, if the required approvals listed below are obtained, regardless of
whether the Merger is consummated. To be effected, the Merger and proposed
Amendment must be approved by an affirmative vote of a majority of the
outstanding shares. The NEES Board of Directors must also approve the
proposed Amendment by a two-thirds vote. The Merger is subject to a number of
conditions, including the approval of the Commission under the Act and other
regulatory approvals. The Amendment is also subject to the approval of the
Commission.
The proposed new Article 59B to the Trust Agreement provides that a
Massachusetts limited liability company, like NGG Holdings, could merge into
NEES in accordance with Chapters 156C and 182 of the Massachusetts General
Laws. Under Chapter 156C and amendments to Chapter 182, which were enacted in
1995, a Massachusetts limited liability company may merge with a Massachusetts
business trust. The NEES Trust Agreement predated the Massachusetts statute
on limited liability companies, and accordingly, the Trust Agreement did not
give shareholders the ability to vote to merge with limited liability
companies. The proposed Amendment would enable shareholders to vote on such
mergers. After adoption of the proposed amendment, such a merger could be
effected by vote of a majority of the shares outstanding and a two-thirds vote
of the Board of Directors. This amendment to the Trust Agreement is necessary
to effect a merger of NGG Holdings into NEES.
The proposed new Article 59B of the Trust Agreement also provides that
in any merger between NEES and a Massachusetts limited liability company,
shareholders who vote against the merger, and follow the procedures set forth
below, have the same appraisal rights as stockholders of a Massachusetts
business corporation. Massachusetts General Laws, Chapter 156B, Sections 87-
98 provide that stockholders of a Massachusetts business corporation, if they
give a specified written notice before a merger vote and also vote against the
merger, can go through a procedure to have an independent valuation made of
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the shares and receive the amount of the valuation in exchange for their
shares. Such an appraisal procedure is being offered in the vote on the
Merger. This would be the only remedy for any objecting shareholders should
such a merger be consummated. The proposed language changes to Article 58
would conform Article 58 to Article 59B to allow for a certificate to be filed
in the event of a merger pursuant to the new Article 59B.
NEES proposes to hold its annual meeting on April 6, 1999. It is NEES'
intention to mail definitive proxy materials to its shareholders at least 30
days prior to the meeting and to send all related proxy materials to print on
February 26, 1999. In order for NEES to provide its shareholders with the
proxy materials in a timely manner, NEES respectfully requests that the
Commission grant it authority by February 19, 1999 to provide its shareholders
with such proxy materials in their final form and solicit such proxies.
Item 2. Fees, Commissions and Expenses
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The estimated fees and expenses in connection with the proposed
transaction include incidental services in connection with the transactions to
be performed by New England Power Service Company (a wholly owned subsidiary
of NEES) (the Service Company) at the actual cost thereof. The Service
Company is an affiliated service company operating pursuant to Section 13 of
the Act and the Commission's rules thereunder. The cost of such services is
estimated to be approximately $50,000.
The estimate of the approximate amount of fees and expenses payable to
others in connection with the proposed solicitation is as follows:
Counsel fees 50,000
Proxy solicitation firm 25,000
Printing expense 160,000
Miscellaneous and
incidental expenses 25,000
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TOTAL $260,000
Item 3. Applicable Statutory Provisions
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Sections 6(a)(2) and 7 of the Act are applicable to the proposed
amendments to Articles 58 and 59B of the Trust Agreement.
Section 12(e) of the Act and Rules 62 and 65 are applicable to the
solicitation of proxies.
Item 4. Regulatory Approval
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No state regulatory authority and no federal regulatory authority, other
than the Commission, have jurisdiction over the proposed solicitation.
However, the Merger will require approvals from the Commission under the Act
and other regulatory approvals.
Item 5. Procedure
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It is requested that the Commission (i) take action with respect to this
Declaration without a hearing, (ii) approve the proposed proxy solicitation in
its notice of this filing not later than February 19, 1999, and (iii) enter an
appropriate order approving the proposed amendments to the Trust Agreement.
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No recommended decision by a hearing officer or other responsible
officer of the Commission is necessary or required in this matter. The
Division of Investment Management of the Commission may assist in the
preparation of the Commission's decision in this matter. There should be no
thirty-day waiting period between the issuance and the effective date of any
order issued by the Commission in this matter, and it is respectfully
requested that any such order be made effective immediately upon the entry
thereof.
Item 6. Exhibits and Financial Statements
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(a) Exhibits
A-1 NEES Agreement and Declaration of Trust dated January 2,
1926, as amended Incorporated by reference to Exhibit 3 to
1994 NEES Form 10-K, File No. 1-3446
A-2 Proposed Amendment to Agreement and Declaration of Trust
B-1 Preliminary Proxy Statement Draft
B-2 Press Release
B-3 Agreement and Plan of Merger, dated as of December 11, 1998
Incorporated by reference to Exhibit 10(mm) to NEES Form 8-K
dated December 11, 1998
*F Opinion of Counsel
H Proposed Form of Notice
* To be filed by amendment.
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ITEM 7. ENVIRONMENTAL EFFECTS
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The proposed solicitation does not involve major Federal action having a
significant effect on the human environment. No Federal agency has prepared
or is preparing an environmental impact statement with respect to the proposed
solicitation.
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SIGNATURE
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Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this Application/ Declaration
on Form U-1 to be signed on its behalf, as indicated by the undersigned
officer thereunto duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/John G. Cochrane
By
John G. Cochrane, Treasurer
Date: January 27, 1999
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary
of The Commonwealth of Massachusetts. Any agreement, obligation or liability
made, entered into or incurred by or on behalf of New England Electric System
binds only its trust estate, and no shareholder, director, trustee, officer or
agent thereof assumes or shall be held to any liability therefor.
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EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ------------ ------
A-1 NEES Agreement and Declaration of Incorporated by
Trust reference
A-2 Proposed Amendment to Agreement and Filed herewith
Declaration of Trust
B-1 Preliminary Proxy Statement/Draft Confidential
treatment
requested
B-2 Press Release Filed herewith
B-3 Agreement and Plan of Merger Incorporated by
reference
F Opinion of Counsel To be filed by
Amendment
H Proposed Notice Filed herewith
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Exhibit A-2
TEXT SHOWING CHANGES PROPOSED TO THE AGREEMENT
AND DECLARATION OF TRUST
- -Bracketed text to be deleted, underlined text to be added.-
Article 58
58. In case these trusts shall be terminated or in the case of any merger
approved pursuant to Section 59B or in the case any of the terms, powers and
provisions herein contained shall be altered, amended, added to or rescinded
pursuant to the provisions of Article 57, a certificate in any number of
counterparts deemed desirable, setting forth such termination or merger,
alteration, amendment, addition or rescission and that the Board of Directors
and Shareholders have authorized the same in accordance with the provisions of
[said] Article 57 or Article 59B, as applicable, shall be signed by two of the
Directors and by the secretary or any assistant secretary, and shall be
acknowledged by one of the Directors and one counterpart of said certificate
shall be filed with the Trustee and other counterparts thereof shall be
recorded or filed at the principal office of these trusts and in such places
as may be required by law.
Article 59B (new)
59B. Merger. Except as provided in Article 59A above, the Board of
Directors by two-thirds vote may cause a domestic limited liability company to
be merged into these trusts in accordance with Chapters 156C (Massachusetts
Limited Liability Company Act) and 182 (Voluntary Associations and Certain
Trusts) of the Massachusetts General Laws, if such merger has been authorized
by vote, at a meeting duly called for the purpose upon at least twenty days'
prior notice, of a majority of the shares outstanding and entitled to vote
thereon at such meeting. Any such merger shall become effective only upon
presentation to the Trustee, as required by Article 58, of the counterpart of
the certificate referred to in Article 58, or at such later time as may be
specified in the certificate. In respect to any such merger, the holders of
all shares of the Company who dissent from such transaction within the time
and in the manner provided in the Massachusetts statute applicable to business
corporations, shall have substantially those rights they would have if these
trusts were at the time a Massachusetts business corporation. Such rights
shall be the Shareholders' exclusive remedy in respect of such holders'
dissent from any such actions.
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Exhibit B-2
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
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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.
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.
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Exhibit H - Proposed Notice
New England Electric System (NEES), 25 Research Drive, Westborough,
Massachusetts 01582, a registered holding company, has filed an
Application/Declaration pursuant to Sections 6(a)(2), 7, and 12(e) of the
Public Utility Holding Company Act of 1935 (Act), and Rules 62 and 65 under
the Act.
NEES has entered into an Agreement and Plan of Merger, dated as of December
11, 1998 (the Merger Agreement), with The National Grid Group, plc, a public
limited company incorporated under the laws of England and Wales (National
Grid) and Iosta LLC, a Massachusetts limited liability company which is
directly and indirectly wholly owned by National Grid (Iosta). Iosta changed
its name to NGG Holdings LLC (NGG Holdings) subsequent to the date of the
Merger Agreement. NEES would be the surviving entity and become a wholly
owned subsidiary of National Grid. Under the Merger Agreement, among other
things, NEES agreed to hold a meeting of its shareholders to obtain the
shareholder approvals required to effect the Merger.
NEES proposes to solicit proxies from its common shareholders to approve
various matters in connection with the Merger at the annual NEES shareholders
meeting, scheduled in early April 1999. The NEES shareholders will also be
asked to consider and approve an amendment (Amendment) to NEES' Agreement and
Declaration of Trust (the Trust Agreement), to provide for the merger of a
Massachusetts limited liability company with and into NEES and to provide
appraisal rights to shareholders. The proposed Amendment will be effected if
approved by an affirmative vote of a majority of the outstanding shares. The
NEES Board of Directors must then approve the Amendment by a two-thirds vote.
The proposed Amendment will be effected if so approved, regardless of whether
the merger is consummated. Accordingly, NEES requests that an order
authorizing the solicitation of proxies to be issued as soon as practicable
under Rule 62(d).
At a later date, NEES and National Grid plan to file an application-
declaration with this Commission requesting authority to consummate the
merger.
It appears to the Commission that NEES' declaration regarding the proposed
solicitation of proxies should be permitted to become effective immediately.
IT IS ORDERED, under Rule 62 under the Act, that the declaration regarding
the solicitation of proxies can become effective immediately, subject to the
terms and conditions contained in Rule 24 under the Act.
