Filed by Consolidated Edison, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Consolidated Edison, Inc. (DE)
Commission File No. 333-31390
The following information was included in a March 23, 2000 Special Edition of NU
Today, a bulletin posted to all employees of Northeast Utilities: Approved copy,
ready for publication, revision 6, March 23, with legend included So what is the
deal? By Investor Relations and Shareholder Services.
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Note: Words in bold are defined further in the glossary of terms on pages 2 and
3. The goal of this article is to explain to you - as a shareholder - the merger
agreement between Consolidated Edison (Con Edison) and Northeast Utilities (NU).
As you already know, this is not a simple deal to understand, but if you spend a
few minutes reading this story, we believe many of your questions will be
answered. We hope you will encourage your peers to read it, too. From the
outset, please understand that this article will not attempt to address
employment issues associated with the merger. Those issues, which we know are
critically important to all employees, are being addressed by the transition
teams, and more information will be made available as decisions are made this
spring and summer. We are just now beginning to talk to you about the merger
because regulatory requirements prevent merging companies in any industry from
discussing their deals publicly - beyond the details available the day the
merger was announced before the complete proxy statement is mailed to all
shareholders. With the proxy statement being mailed the first week in March, we
are now able to begin discussing the merger with you. This delay (October-March)
is due to the fact that the SEC carefully reviews the proxy statement before
allowing us to ask investors for support. We therefore are required to stick
pretty closely to what's on the proxy statement when we talk to shareholders,
including employees. This is designed so that companies "sell" their proposal to
investors through SEC reviewed and authorized documents. Most of the employee
communications sent to you over the next month or so about the financial aspects
of the merger also will be sent to the SEC. We urge you to read the proxy
statement. It's big, it's dense and it's legalistic. But the proxy is the best
source of information on this deal and should answer your questions. This
article is an effort to summarize some of what is in the proxy, but it doesn't
replace it. So let's discuss the deal. Con Edison has offered to buy all of the
shares of Northeast Utilities for a base price of $25 a piece. The $25 price is
subject to adjustment by three very important factors: * The timing of the
closing of the deal, * The successful auction of Millstone Station (the
divestiture condition), * Con Edison's share price just prior to closing (the
pricing period). Now let's look at each of the three factors which will affect
that $25 price, starting with the timing issue. The price Con Edison pays for NU
shares starts to increase on August 5, 2000, by about one third of a penny per
day, or about 10 cents per month, for every day the deal does not close. If we
close the merger at the end of December 2000, that would mean an extra 50 cents
per share would be paid to NU shareholders on top of the base price of $25 per
share. A best-case scenario would enable NU and Con Edison to close this deal in
August. Second, there is the divestiture condition. As incentive for NU to sell
Millstone Station, Con Edison has agreed to pay an extra $1 per share if the
Utilities Operations and Management Unit (UOMA) of the Connecticut Department of
Public Utility Control recommends the sale of Millstone to the winning bidder in
the auction. NU shareholders will receive this $1 per share if UOMA makes this
recommendation by December 31, 2000, or by the time the merger closes whichever
is later. What happens if we close the merger before UOMA makes its
recommendation? As long as the recommendation is made before December 31, 2000,
NU shareholders still will receive the $1 for each of their shares; it just will
be paid to them separately. NU shareholders will not receive the $1 per share if
the recommendation never comes or if it comes after December 31, 2000 and after
the merger closes. The third factor which affects the value of the deal is Con
Edison's share price during the pricing period, and frankly, this is the one
that most shareholders are thinking about right now. It's also the most
complicated, but bear with us and we can help you understand it. The merger
agreement places what's called a "collar" on Con Edison's share price of between
$36 and $46. The collar limits -- both above and below the $36 to $46 range --
the number of shares of Con Edison stock that will be issued to those
shareholders electing to exchange their NU shares for Con Edison shares. It has
absolutely no impact on the cash portion of the deal. In order to demonstrate
the impact of the collar, we need to make a few basic assumptions. First, let's
assume the deal closes August 1, 2000 so the merger price would be $25. (Let's
leave the Millstone divestiture dollar aside for now.) To determine the value of
the deal, you multiply the number of NU shares you own by the merger price.
Let's say you own 100 shares. 100 shares x $25 merger price = $2,500 If you
elect to receive all cash, you'll receive $2,500 (subject to proration), which
will be subject to taxes if you paid less than $25 per share for them
originally. If you elect to receive all stock, you take the math one step
further and do some basic division. If Con Edison's price during the Pricing
Period is somewhere between $36 and $46, you divide your $2,500 by the actual
average trading price. Let's assume the average trading price is $36. $2,500/$36
= 69.4 Con Edison shares Your 100 NU shares would be exchanged for 69.4 Con
Edison shares, which would have a total value of $2,500. The collar will have an
impact on the total value of the deal only when Con Edison's share price is
below $36 or over $46. Under the terms of the merger agreement, the Con Edison
share price used as the denominator in the above calculation may not be less
than $36 or more than $46. Here's what that means. Let's say Con Edison's
average price is $30 per share. 100 NU shares x $25 merger price = $2,500 Again,
if you elect all cash, you receive $2,500 and you are not impacted by the
collar. However, bear in mind, that due to "proration," you may not receive 100
percent cash even though you elect all cash.
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If you elect to receive all stock, here's how the math works. Instead of using
the actual average price ($30) as the denominator, you must use $36. $2,500/$36
= 69.4 shares However, those 69.4 shares have a market value of $30 each. If you
turned around and sold them in the market that day, they would be worth only $30
apiece. 69.4 shares x $30 = $2,083 If you divide that by your original 100 NU
shares, you'll see that you were paid $20.83 per share. $2,083/100 shares =
$20.83 However, the receipt of Con Edison shares is nontaxable, whereas, as
mentioned above, receipt of cash is taxable. If you're confused, you're not
alone. Even sophisticated institutional investors and analysts who look at
mergers frequently, have needed some help understanding the collar provisions of
this deal. You may need to read about the collar a few more times, and maybe
fiddle around with a calculator, a pencil and a piece of paper. So now that
we've explained the deal, let's take a look at what it will take to get it
approved by shareholders In order for the vote to pass, NU needs a supermajority
to approve the deal. A supermajority is a fancy way of saying we need two-thirds
or about 66.7 percent of outstanding shares to be voted "yes" in order to
consummate the merger. That's about 90 million shares voting "FOR" the merger.
Votes that are not cast are considered votes "against" the merger, as are actual
votes cast "against." But what if the vote fails? Well, that means that the
current merger proposed between the two companies would fail. If NU's management
still believed a merger was in the best interests of shareholders, and if the
two companies still wished to merge, they might try to enter into a new deal.
Or, NU might seek another merger partner. The failure of this deal to pass won't
change the industry and market forces which led to the merger in the first
place. It won't change the fact that NU needs to grow in order to survive in the
competitive environment. Our goal, as we stated at the outset, is to try to
explain this merger as clearly as we can. We know there are lots of questions
out there, and we look forward to answering them in face-to-face meetings, as
well as over the phone or e-mail. Graphics within the article Proxy voting cards
Each proxy card represents NU shares held in different locations. * If you
participate in the 401(k), you will receive a proxy from Fidelity. * If you
participate in the Employee Share Purchase Plan, you will receive a proxy from
Salomon Smith Barney for those shares. * If you are a registered shareholder
with NU, Shareholder Services will be sending you a proxy. Remember, all your
votes count! About the proxy Shareholders may receive more than one proxy
statement. You don't have to read each one but you do need to vote each proxy
card you receive. Each proxy card represents NU shares held in different
locations. Not voting is the same as casting a "no" vote. How will Con Edison
pay me for my shares? Later in the process, assuming we receive all necessary
approvals, NU shareholders will have the right to choose either cash or Con
Edison shares as payment for their NU shares. However, the entire pool of NU
shares ultimately will be paid for by Con Edison with 50 percent of such shares
being paid for in cash and 50 percent being paid for in Con Edison shares. The
process of adjusting the entire pool of elections is called proration. A pricing
period? The pricing period for this merger is 20 randomly selected days during
the 40 days leading up to the closing. We don't know when the closing is, so we
don't know when the pricing period is, but we can safely assume it's at least
several months away. For more information * Call the Con Edison/NU merger
information line at 1-800-558-5947 * Call Shareholder Services at 1-800-794-1104
from 8 a.m. to 9:30 p.m. * Contact Corporate Communications at 860-665-3256 or
Berlin Ext. 3256. * Read Con Edison/NU Merger News on the Employee Information
Board, available through the NUnet. Con Edison/NU merger timeline 1999 Oct. 13 -
Consolidated Edison and Northeast Utilities announce that the boards of both
companies have approved a definitive merger agreement to combine the two
companies. Under the agreement, Consolidated Edison will acquire all of the
common stock of NU for $25 per share in a combination of cash and Consolidated
Edison common stock, subject in the case of the common stock, to certain collar
provisions. Nov. 17 - NU and Con Edison file their joint proxy and registration
statement with the Securities and Exchange Commission (SEC). 2000 Jan. 3 - As
part of the overall communications effort, an 800 number is established for
employees of both companies to call to obtain merger updates and ask questions.
The number is 1-800-558-5947. Jan. 11 - The SEC provides the first round of 120
comments on the joint proxy statement. Jan. 12 - NU and Con Edison begin the
first of a series of state and federal regulatory filings. Con Edison filed in
New York with the New York State Public Service Commission, and NU filed in
Connecticut with the Department of Public Utility Control. Jan. 21 - The
companies have a joint filing with the Department of Justice concerning
antitrust matters. Jan. 21 - The companies respond to 120 comments from the SEC
on the initial filing of the joint proxy statement. Feb. 2 - Mike Morris and
Eugene McGrath, Con Edison's chairman and CEO, hold joint Employee Forum in
Berlin. Feb. 3 - The Connecticut Department of Public Utility Control
establishes the schedule for hearings on the merger application, beginning in
mid-April. The schedule calls for a decision by June 21. March 1 - Con Edison
and NU receive SEC approval to mail joint proxy statements seeking shareholder
approvals. April 14 - NU and Con Edison will hold separate shareholder meetings
for shareholders to vote on our merger. Understanding the proxy A glossary of
terms Merger agreement - The legal document which defines all the terms and
conditions of the merger between our two companies. Proxy statement - The legal
document which explains the details of a vote that will be requested from
shareholders. Proxies that relate to a proposed merger must be filed with the
Securities and Exchange Commission (SEC). The SEC then reviews the entire
document. Proxy card - The voting instruction form enabling shareholders to cast
their vote. This is the document on which a shareholder casts his or her vote
and returns it for tallying. Election period - The defined period of time,
usually just before the merger closes, when shareholders are asked to elect how
they wish to be paid for the exchange of their shares. In this case,
shareholders are asked to decide between cash and shares of Con Edison stock.
Proration - The process of adjusting the elections made by shareholders after
the election process to meet the terms of the merger agreement. In this case,
proration will adjust the total number of NU shares to be converted to 50
percent cash and 50 percent shares. Collar - The term used in this merger
agreement to describe upper and lower limits of a price range on Con Edison's
stock. Below the collar level, the stock portion of the deal declines in value.
Above the collar, the stock portion of the deal increases in value. The cash
value is unaffected by the collar. Break-up provision - The common name for
language in a merger agreement which defines the circumstances under which
either party to the merger may withdraw from the deal and the fees associated
with the decision to withdraw. Registered shareholder - A shareholder whose name
and ownership is registered directly on the books of the company. NU has about
84,000 registered shareholders.
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Street name shareholder -A shareholder whose name and ownership are registered
on the books of a broker/dealer or other institution and is not directly
available to the company. For NU, this is about 40,000 holders. Institutional
investor - A street name holder who invests in large amounts, generally for
pension funds, mutual funds, banks or other money management purposes. Equity
analyst - Generally, equity analysts are individuals who evaluate various
investment options and advise investors on their analysis of the financial
strength of a corporation, their view of the industry and its risks and the
strategy of the business. SEC - The Securities and Exchange Commission is a
federal regulatory body which governs the registration of securities of all
publicly held companies and also regulates registered public utility holding
companies. UOMA - A section of the staff of the Connecticut Department of Public
Utility Control called the Utilities Operations and Management unit, which is
responsible for managing the auction of CL&P's generation assets. Pricing period
- - In this merger, the 40 days ending five days before the effective date of the
merger, from which 20 days will be randomly selected to average the closing
price of Con Edison's shares. Provided this average price falls within the
collar, it will be used to determine the ratio of Con Edison shares that NU
holders will receive in exchange for their NU shares. Declaration of Trust -
NU's basic organizing document, similiar to a corporation's charter or
certificate of incorporation. Divestiture Condition - A provision of the merger
agreement designed to provide incentive for NU to sell Millstone Station. This
provision allows for payment of $1 for each NU share if UOMA recommends the sale
of the Millstone units to the winning bidder in the auction by the later of
either December 31, 2000, or the closing of the merger. LEGEND For more
information Con Edison and Northeast Utilities have filed a joint proxy
statement/prospectus and other documents concerning the merger with the United
States Securities and Exchange Commission ("SEC") and have mailed the joint
proxy statement/prospectus to their shareholders. THESE DOCUMENTS CONTAIN
IMPORTANT INFORMATION AND WE URGE YOU TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT HAVE BEEN OR WILL BE FILED WITH
THE SEC. You can obtain the documents free of charge at the SEC's Web site,
www.sec.gov. In addition, the documents are available free of charge by
requesting them in writing or by telephone from the companies at the following
addresses: Consolidated Edison, Inc., c/o The Bank of New York Investors
Relations Department, P.O. Box 11258, Church Street Station, New York, New York
10286-1258, telephone 800-522-5522 and Northeast Utilities, P.O. Box 5006,
Harford, Connecticut 06102-5006, Attention: Shareholders Services, telephone
860-665-4801 or 800-999-7269. This information contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. The forward-looking statements are subject to various risks and
uncertainties. Discussion of factors that could cause actual results to differ
materially from management's projections, forecasts, estimates and expectations
may include factors that are beyond the company's ability to control or estimate
precisely, such as estimates of future market conditions, the ability to realize
cost savings and the terms associated with obtaining regulatory approvals. Other
factors include, but are not limited to, weather conditions, economic conditions
in the company's service territory, fluctuations in energy-related commodity
prices, marketing efforts and other uncertainties. Other risk factors are
detailed from time to time in the two companies' SEC reports.
