Securities and Exchange Commission
Washington, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
Date of Report July 15, 1997
(Date of earliest event reported)
CalEnergy Company, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9874 94-2213782
(State of other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
302 South 36th Street, Suite 400, Omaha, NE 68131
(Address of principal executive offices) Zip Code
Registrant's Telephone Number, including area code: (402) 341-4500
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events
On July 15, 1997, CalEnergy Company, Inc. (the "Registrant")
announced that its wholly owned subsidiary CE Electric (NY), Inc.
intends to commence a cash tender offer for 6,540,670 shares of
common stock ("NYSEG Common Shares") of New York State Electric &
Gas Corporation which, together with common shares held by
affiliates of the Registrant, will represent 9.9% of the
outstanding NYSEG Common Shares. The tender offer is the
Registrant's first step toward the intended acquisition of 100%
of the NYSEG Common Shares. See attached Press Release.
Item 7. Financial Statements and Exhibits
Exhibit 1 - Press Release dated July 15, 1997
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.
CalEnergy Company, Inc.
By: \s\ Douglas L. Anderson
Douglas L. Anderson
Assistant Secretary and
Assistant General Counsel
Dated: July 15, 1997
Exhibit 1
FOR IMMEDIATE RELEASE
Contacts:
Patti J. McAtee
Director, Corporate Communications
(402) 341-4500
Joele Frank
Abernathy MacGregor Group Inc.
(212) 371-5999
CALENERGY ANNOUNCES TENDER OFFER FOR 6,540,670 SHARES OF NYSEG
COMMON STOCK AT $24.50 PER SHARE
OMAHA, Neb., July 15, 1997, CalEnergy Company, Inc.
("CalEnergy") (NYSE, PSE AND LSE symbol: CE) announced today that
its wholly owned subsidiary CE Electric (NY), Inc. intends to
commence a cash tender offer for 6,540,670 shares of the Common
Stock of New York State Electric & Gas Corporation ("NYSEG")
(NYSE symbol: NGE) at a price of $24.50 per share. Holders
tendering their shares will also be entitled to retain the
regular 35 cents dividend payable in August.
The purpose of the tender offer is to acquire shares which,
together with the shares of Common Stock currently owned by
CalEnergy and its affiliates, will represent 9.9% of the
outstanding Common Stock of NYSEG, the maximum percentage that
can be acquired without certain federal and state regulatory
approvals. The tender offer is CalEnergy's first step toward the
intended acquisition of 100% of NYSEG's outstanding Common Stock.
The tender offer is not subject to any financing condition.
It is, however, conditioned upon, among other things (i) at least
6,540,670 shares of Common Stock being validly tendered and not
withdrawn and (ii) the expiration or termination of all waiting
periods imposed by the Hart-Scott-Rodino Antitrust Improvements
Act.
On July 10, 1997, David L. Sokol, the Chairman and Chief
Executive Officer of CalEnergy met with Wesley W. von Schack, the
Chairman, President and Chief Executive Officer of NYSEG to
discuss the possibility of a business combination between NYSEG
and CalEnergy. Subsequent to that meeting, Mr. von Schack called
Mr. Sokol to inform him that the Board of Directors of NYSEG, at
a meeting on July 11, 1997, had determined that discussions of
this opportunity were not a priority and could not be conducted
on the timely basis which Mr. Sokol had outlined in their meeting.
Accordingly, today Mr. Sokol sent the following letter to
the Board of Directors of NYSEG:
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"July 15, 1997
BY HAND AND
VIA FAX
Mr. Wesley W. von Schack
Chairman, President &
Chief Executive Officer
New York State Electric & Gas Corporation
4500 Vestal Parkway East
Binghamton, New York 13902-3607
Fax: 607-729-3318
Dear Wes:
I was disappointed to learn from you in our telephone call on
Saturday, July 12th of your Board's decision that pursuing
discussions with us concerning the advantages of a possible
combination of New York State Electric & Gas Corporation
("NYSEG") and CalEnergy Company, Inc. ("CalEnergy") was not a
priority and could not be conducted on the timely basis which I
outlined to you in our meeting last week, on Thursday, July 10th.
I might add that your Board's reaction does not appear to be
consistent with the clear impression you gave me in our meeting
last Thursday to the effect that a sale of NYSEG in the price
range we conceptually discussed was an alternative that you would
seriously and promptly consider and that you agreed it was in the
best interests of your shareholders that you do so.
Accordingly, after considered review of the publicly available
information concerning NYSEG, the CalEnergy Board has concluded
that the potential strategic and financial benefits to our
companies' shareholders and other concerned constituencies are
compelling and should be pursued on an immediate and serious
basis. Our strong preference would be to work together with you
and the NYSEG Board to complete a negotiated transaction.
However, in light of the confusing messages we have received from
you and your Board, CalEnergy is today approaching your
shareholders directly and announcing a cash tender offer to
acquire for $24.50 per share that number of shares of NYSEG
common stock which, together with the shares of NYSEG common
stock which CalEnergy presently owns, will represent 9.9% of the
total number of shares of NYSEG common stock outstanding. Holders
tendering their shares will also be entitled to retain the
regular 35 cents dividend payable in August. This tender offer is the
first step in the intended acquisition of 100% of NYSEG's common
shares by CalEnergy.
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As previously noted, we would much prefer to work together with
you and your Board to achieve a negotiated transaction.
Accordingly, this letter sets forth a specific proposal for
consideration by you and your Board, together with a brief
reiteration of the merger rationale which I shared with you at
our meeting last week.
Our specific merger proposal is to commence negotiations
immediately to enter into a consensual merger in which each
outstanding share of NYSEG common stock would be exchanged for
$27.50 in cash. This cash price represents a premium of 31.74%
above the NYSEG $20 7/8 per share NYSE closing price on June 30,
1997 (the day immediately preceding the day on which we first
commenced our open market purchases of NYSEG Common Stock). I
would also note that the cash merger price which we propose
exceeds the up to 25% premium for NYSEG Common Stock which you
indicated, in our conceptual discussion during our meeting last
Thursday, might be appropriate in the context of a stock for
stock merger of NYSEG and CalEnergy.
As I informed you in our meeting last week, we have reviewed the
regulatory issues in detail and have fully underwritten financing
offers in an amount sufficient to complete the acquisition of
100% of NYSEG's common stock at the price set forth above. The
difference between our proposed consensual merger price and our
partial tender offer price reflects the shorter time interval and
increased certainty associated with the purchase of 9.9% of
NYSEG's common shares. The partial tender offer requires no
regulatory approvals other than expiration of the expected 15-day
Hart-Scott-Rodino waiting period, as compared to the estimated
nine to twelve months for the regulatory approvals required to
complete the acquisition of 100% of NYSEG's common stock.
While NYSEG clearly possesses many strengths, you have publicly
acknowledged that both New York's energy industry generally and
NYSEG specifically face a number of serious, complex and
immediate challenges. These include:
The New York Public Service Commission's restructuring
proceedings with respect to, among other things, (i) the lowering
of the rates chargeable by NYSEG and other New York utilities,
(ii) the potential divestiture of generation assets and (iii) the
introduction of broadened competition;
Litigation by NYSEG concerning the unimplemented rate
increases approved in NYSEG's last rate case (August 1995);
NYSEG's potentially strandable above-market costs (which you
have publicly stated are more than twice the national average);
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NYSEG's flat revenues over the last two years; and
The consistent underperformance of NYSEG's common stock
since NYSEG cut its dividend in October 1994.
CalEnergy welcomes the deregulation of the New York electric
market and views increased competition as positive and beneficial
to ratepayers and the larger New York community alike. We would
expect to bring a helpful competitive focus to NYSEG's transition
to such an environment and in meeting the competitive challenges
which it faces.
CalEnergy, which has (according to analysts' consensus estimates)
expected 1997 revenues in excess of $2 billion, traces its roots
to the introduction of the competitive electric generation
industry within the United States and has expanded and thrived in
the competitive marketplace, both within the U.S. and
internationally.
As I described to you, CalEnergy's U.K. utility subsidiary,
Northern Electric plc (which is engaged in the distribution and
supply of electricity to approximately 1.5 million customers,
primarily in Northeast England), brings us direct experience,
systems and skills acquired in the deregulated and competitive
U.K. electric and gas markets. We anticipate using these skills
and working closely with the New York Public Service Commission
to provide rate reductions for all NYSEG customers following the
proposed merger, while maintaining the safe and reliable service
to which they are accustomed.
Consistent with CalEnergy's decentralized regional organization,
we would intend to maintain NYSEG as a separate operating
business unit with its existing corporate headquarters. We would
also plan to reincorporate CalEnergy in New York and grow NYSEG's
business by participating aggressively in the increasingly
competitive New York electric market. This would ultimately make
a significant contribution to the local region's long-term
ability to retain jobs and attract new jobs and businesses.
CalEnergy is a high growth company which has increased its number
of employees tenfold over the past 5 years and provides worldwide
opportunities in its numerous locations.
As I have previously detailed, we believe that our cash merger
proposal, which reflects a substantial premium over NYSEG's
current market value, represents a full and fair price for your
shareholders. Moreover, our proposal would permit your
shareholders to realize this substantial cash value
notwithstanding the significant uncertainties facing NYSEG and
its business today. To the extent that you believe that your
shareholders would view favorably an option to receive CalEnergy
shares or other forms of consideration in lieu of the cash price
we have proposed, we would be willing to consider that in the
context of a negotiated transaction.
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Although we have found it necessary to go directly to your
shareholders with our partial tender offer and advise them of our
merger proposal, my continuing preference is to pursue this
opportunity on a consensual basis with you and NYSEG's board. We
are available to meet with you immediately to discuss the terms
of this proposal. However, if you choose not to enter into
discussions with us, we believe, and we hope you will agree, that
NYSEG's Board ought to permit NYSEG's shareholders to freely
decide for themselves on the merits of our offer rather than
taking any action which would hinder the shareholders' ability to
express their views.
I look forward to hearing from you soon.
Sincerely,
/s/ David L. Sokol
David L. Sokol
Chairman & Chief Executive Officer
cc: Board of Directors of NYSEG
c/o Mr. Wesley W. von Schack"
Mr. Sokol added, "Our proposed business combination would
yield many benefits for NYSEG's customers and employees and the
State of New York. We welcome the various initiatives of the
Governor's office, the legislature and the New York Public
Service Commission to introduce full competition to New York's
energy market. We fully expect that CalEnergy will be able to
work closely with the New York Public Service Commission to
implement rate reductions for all NYSEG customers, while
providing them with the same safe and reliable energy service to
which they are accustomed. Lower rates would give NYSEG an
advantage in meeting the competitive challenges of the
deregulating energy market while contributing to New York's
economic vitality and ability to attract and retain jobs. We
intend to reincorporate CalEnergy in New York and maintain NYSEG
as a distinct operating unit with its existing corporate
headquarters. CalEnergy is a growth company that has increased
its number of employees tenfold in the last five years."
Lehman Brothers Inc. and Credit Suisse First Boston
Corporation are acting as financial advisors to CalEnergy and as
Dealer Managers in connection with the tender offer. MacKenzie
Partners, Inc. is acting as the Information Agent for the tender
offer.
CalEnergy, which manages and owns interests in over 5,000
net MW of power generation facilities in operation, construction
and development worldwide, currently operates 19 generating
facilities and also supplies and distributes electricity to 1.5
million customers.
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