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
Date of Report (Date of earliest event reported): April 28, 1995
NORTHERN STATES POWER COMPANY
(Exact name of registrant as specified in charter)
Wisconsin
(State or other jurisdiction
of incorporation)
10-3140 39-0508315
(Commission File No.) (IRS Employer
Identification No.)
100 North Barstow Street, Eau Claire, Wisconsin 54703
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (715) 839-2621
ITEM 5. OTHER EVENTS
MERGER AGREEMENT WITH WISCONSIN ENERGY CORPORATION
Northern States Power Company, a Wisconsin corporation,
("NSP-W"), is a wholly owned subsidiary of Northern States Power
Company, a Minnesota corporation ("NSP"). NSP, Wisconsin Energy
Corporation, a Wisconsin corporation ("WEC"), Northern Power
Wisconsin Corp., a Wisconsin corporation and wholly-owned
subsidiary of NSP ("new NSP") and WEC Sub Corp., a Wisconsin
corporation and wholly-owned subsidiary of WEC ("WEC Sub"), have
entered into an Agreement and Plan of Merger, dated as of April
28, 1995 (the "Merger Agreement"), which provides for a
strategic business combination involving NSP and WEC in a
"merger-of-equals" transaction (the "Transaction"). The
Transaction, which was unanimously approved by the Boards of
Directors of the constituent companies, is expected to close
shortly after all of the conditions to the consummation of the
Transaction, including obtaining applicable regulatory
approvals, are met or waived. The regulatory approval process
is expected to take approximately 12 to 18 months.
In the Transaction, the holding company of the combined
enterprise will be registered under the Public Utility Holding
Company Act of 1935, as amended. The holding company will be
named Primergy Corporation ("Primergy") and will be the parent
company of both NSP (which, for regulatory reasons, will
reincorporate in Wisconsin) and of WEC's present principal
utility subsidiary, Wisconsin Electric Power Company ("WEPCO"),
which will be renamed "Wisconsin Energy Company." Wisconsin
Energy Company will include the operations of WEC's other
present utility subsidiary, Wisconsin Natural Gas Company, which
is anticipated to be merged into WEPCO by year-end 1995, pending
regulatory approval, as previously planned. It is anticipated
that, following the Transaction, NSP-W will be merged into
Wisconsin Energy Company. In the event NSP-W is merged into
Wisconsin Energy Company, it is expected that NSP-W's first
mortgage bonds will remain outstanding and Wisconsin Energy
Company will assume all obligations related to such bonds in
accordance with the NSP-W first mortgage bond indenture.
The Merger Agreement, the press release issued in
connection therewith and the related Stock Option Agreements
(defined below) previously filed as exhibits (2)-1, (2)-2, (2)-3
and (99)-1 in the May 3, 1995, Form 8-K filing by Northern
States Power Company, a Minnesota Corporation, (Securities and
Exchange Commission File No. 1-3034) are incorporated herein by
reference pursuant to Securities and Exchange Commission rule
12b-32. The descriptions of the Merger Agreement and the Stock
Option Agreements set forth herein do not purport to be complete
and are qualified in their entirety by the provisions of the
Merger Agreement.
Under the terms of the Merger Agreement, NSP will be merged
with and into New NSP and immediately thereafter WEC Sub will be
merged with and into New NSP, with New NSP being the surviving
corporation. Each outstanding share of Common Stock, par value
$2.50 per share, of NSP will be cancelled and converted into the
right to receive 1.626 shares of Common Stock, par value $.01
per share, of Primergy ("Primergy Common Stock"). The
outstanding shares of WEC Common Stock, par value $.01 per
share, will remain outstanding, unchanged, as share of Primergy
Common Stock. As of the date of the Merger Agreement, NSP had
67.3 million common shares outstanding and WEC had 109.4 million
common shares outstanding. Based on such capitalization, the
Transaction would result in the common shareholders of NSP
receiving 50% of the common equity of Primergy and the common
shareholders of WEC owning the other 50% of the common equity of
Primergy. Each outstanding share of Cumulative Preferred Stock,
par value $100.00 per share, of NSP will be cancelled and
converted into the right to receive one share of Cumulative
Preferred Stock, par value $100.00 per share, of New NSP with
identical rights (including dividend rights) and designations.
WEPCO's outstanding preferred stock will remain outstanding and
be unchanged in the Transaction.
It is anticipated that Primergy will adopt NSP's dividend
payment level adjusted for the exchange ratio. NSP currently
pays $2.64 per share annually, and WEC's annual dividend rate is
currently $1.47 per share. Based on the exchange ratio and
NSP's current dividend rate, the pro forma dividend rate for
Primergy would be $1.62 per share.
The Transaction is subject to customary closing conditions,
including, without limitation, the receipt of required
shareholder approvals of WEC and NSP; and the receipt of all
necessary governmental approvals and the making of all necessary
governmental filings, including approvals of state utility
regulators in Wisconsin, Minnesota and certain other states, the
approval of the Federal Energy Regulatory Commission, the
Securities and Exchange Commission (the "SEC"), the Nuclear
Regulatory Commission, and the filing of the requisite
notification with the Federal Trade Commission and the
Department of Justice under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the expiration of the
applicable waiting period thereunder. The Transaction is also
subject to receipt of assurances from the Internal Revenue
Service and opinions of counsel that the Transaction will
qualify as a tax-free reorganization, and the assurances from
the parties' independent accountants, that the Transaction will
qualify as a pooling of interests for accounting purposes. In
addition, the Transaction is conditioned upon the effectiveness
of a registration statement to be filed by WEC with the SEC with
respect to the Primergy Common Stock to be issued in the
Transaction and the approval for listing of such shares on the
New York Stock Exchange. (See Article VIII of the Merger
Agreement.) Shareholder meetings to vote upon the Transaction
will be convened as soon as practicable and are expected to be
held in the third or fourth quarter of 1995.
The Merger Agreement contains certain covenants of the
parties pending the consummation of the Transaction. Generally,
the parties must carry on their businesses in the ordinary
course consistent with past practice, may not increase dividends
on common stock beyond specified levels, and may not issue any
capital stock beyond certain limits. The Merger Agreement also
contains restrictions on, among other things, charter and bylaw
amendments, capital expenditures, acquisitions, dispositions,
incurrence of indebtedness, certain increases in employee
compensation and benefits, and affiliate transactions. (See
Article VI of the Merger Agreement.)
The Merger Agreement provides that, after the effectiveness
of the Transaction (the "Effective Time"), the corporate
headquarters and principal executive offices of Primergy and NSP
will be located in Minneapolis, Minnesota, and the headquarters
of Wisconsin Energy Company will remain in Milwaukee, Wisconsin.
Primergy's Board of Directors, which will be dividend into three
classes, will consist of a total of 12 directors, 6 of whom
shall be designated by WEC and 6 of whom will be designated by
NSP. Mr. James J. Howard, the current Chairman of the Board,
President and Chief Executive Officer ("CEO") of NSP, will serve
as CEO of Primergy from the Effective Time until the later of 16
months after the Effective Time or the date of the annual
meeting of shareholders of Primergy that occurs in 1998, and
Chairman of Primergy until the later of July 1, 2000 or two
years after he ceases to be CEO. Mr Abdoo, the current Chairman
of the Board, President and CEO of WEC, will serve as Vice
Chairman of the Board, President and Chief Operating Officer of
Primergy until the date when Mr. Howard ceases to be CEO, at
which time he will be entitled to assume the additional role of
CEO. Mr. Abdoo will assume the position of Chairman when Mr.
Howard ceases to be Chairman.
The Merger Agreement may be terminated under certain
circumstances, including (1) by mutual consent of the parties;
(2) by any party if the Transaction is not consummated by April
30, 1997 (provided, however, that such termination date shall be
extended to October 31, 1997 if all conditions to closing the
Transaction, other than the receipt of certain consents and/or
statutory approvals by any of the parties, have been satisfied
by April 30, 1997); (3) by any party if either NSP's or WEC's
shareholders vote against the Transaction or if any state of
federal law or court order prohibits the Transaction; (4) by a
non-breaching party if there exist breaches of any
representations or warranties contained in the Merger Agreement
as of the date thereof which breaches, individually or in the
aggregate, would result in a material adverse effect on the
breaching party and which is not cured within twenty (20) days
after notice; (5) by a non-breaching party if there occur
breaches of specified covenants or material breaches of any
covenant or agreement which are not cured within twenty (20)
days after notice; (6) by either party if the Board of Directors
of the other party shall withdraw or adversely modify its
recommendation of the Transaction or shall approve any competing
transaction; or (7) by either party, under certain
circumstances, as a result of a third-party tender offer or
business combination proposal which such party's board of
directors determines in good faith that their fiduciary duties
require be accepted, after the other party has first been given
an opportunity to make concessions and adjustments in the terms
of the Merger Agreement.
The Merger Agreement provides that if a breach described in
clause (4) or (5) of the previous paragraph occurs, then, if
such breach is not willful, the non-breaching party is entitled
to reimbursement of its out-of-pocket expenses, not to exceed
$10 million. In the event of a willful breach, the non-
breaching party will be entitled to its out-of-pocket expenses
(which shall not be limited to $10 million) and any remedies it
may have at law or in equity, provided that if, at the time of
the breaching party's willful breach, there shall have been a
third party tender offer or business combination proposal which
shall not have been rejected by the breaching party and
withdrawn by the third party, and within two and one-half years
of any termination by the non-breaching party, the breaching
party accepts an offer to consummate or consummates a business
combination with such third party, then such breaching party,
upon the signing of a definitive agreement relating to such a
business combination, or, if no such agreement is signed then at
the closing of such business combination, will pay to the non-
breaching party an additional fee equal to $75 million. The
Merger Agreement also requires payment of a termination fee of
$75 million (and reimbursement of out-of-pocket expenses) by one
party (the "Payor") to the other in certain circumstances, if
(i) the Merger Agreement is terminated (x) as a result of the
acceptance by the Payor of a third-party tender offer or
business combination proposal, (y) following a failure of the
shareholders of the Payor to grant their approval to the
Transaction or (z) as a result of the Payor's material failure
to convene a shareholder meeting, distribute proxy materials
and, subject to its board of directors' fiduciary duties,
recommend the Transaction to its shareholders; (ii) at the time
of such termination or prior to the meeting of such party's
shareholders there shall have been a third-party tender offer or
business combination proposal which shall not have been rejected
by the Payor and withdrawn by such third party; and (iii) within
two and one-half years of any such termination described in
clause (i) above, the Payor accepts an offer to consummate or
consummates a business combination with such third party. Such
termination fee and out-of-pocket expenses referred to in the
previous sentence shall be paid upon the signing of a definitive
agreement between the Payor and the third party, or, if no such
agreement is signed, then at the closing of such third-party
business combination. The termination fees payable by NSP or
WEC under these provisions and the aggregate amount which could
be payable by NSP or WEC upon a required purchase of the options
granted pursuant to the Stock Option Agreements (defined below)
may not exceed $125 million in the aggregate. (See Article IX
of the Merger Agreement.)
Concurrently with the Merger Agreement, the parties have
entered into reciprocal stock option agreements (the "Stock
Option Agreements") each granting the other an irrevocable
option to purchase up to that number of shares of common stock
of the other company which equals 19.9% of the number of shares
of common stock of the other company outstanding on April 28,
1995 at an exercise price of $44.075 per share, in the case of
NSP common stock, or $27.675 per share, in the case of WEC
common stock, under certain circumstances if the Merger
Agreement becomes terminable by one party as a result of the
other party's breach or as a result of the other party's breach
or as a result of the other party becoming the subject of a
third-party proposal for the business combination. Any party
whose option becomes exercisable (the "Exercising Party") may
request the other party to repurchase from it all or any portion
of the Exercising Party's option at the price specified in the
Stock Option Agreements. (See the Stock Option Agreements.)
A preliminary estimate indicates that the Transaction will
result in net savings of approximately $2.0 billion in costs
over 10 years. It is anticipated that the synergies created by
the Transaction will allow the companies to implement a modest
reduction in electric retail rates followed by a rate freeze for
electric retail customers through the year 2000. The allocation
of the net savings between ratepayers and shareholders of NSP
will be determined by various regulatory agencies.
Both NSP and WEC recognize that the divestiture of their
existing gas operations and certain non-utility operations is a
possibility under the new registered holding company structure,
but will seek approval from the SEC to maintain such businesses.
If divestiture is ultimately required, the SEC has historically
allowed companies sufficient time to accomplish divestitures in
a manner that protects shareholder value.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS. The following exhibits are incorporated by
reference from the May 3, 1995, Form 8-K filing by Northern
States Power Company, a Minnesota corporation, (Securities
and Exchange Commission File No. 1-3034).
(2)-1 Agreement and Plan of Merger, dated as of
April 28, 1995, by and among Northern States
Power Company, a Minnesota corporation,
Wisconsin Energy Corporation, Northern Power
Wisconsin Corp. and WEC Sub Corp. ("Merger
Agreement")
(99)-1 Press Release dated May 1, 1995, of Northern
States Power Company
NORTHERN STATES POWER COMPANY
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SIGNATURES
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 thereunto duly authorized.
NORTHERN STATES POWER COMPANY
(Registrant)
________________________________________
Kenneth J. Zagzebski
Controller (Principal Accounting Officer)
Date: May 8, 1995
NORTHERN STATES POWER COMPANY
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EXHIBIT INDEX
Current Report on Form 8-K
Report Dated May 8, 1995
Exhibit
Number
(2)-1 Agreement and Plan of Merger, dated as of April 28,
1995, by and among Northern States Power Company,
Wisconsin Energy Corporation, Northern Power Wisconsin
Corp. and WEC Sub Corp. incorporated by reference from
Exhibit (2)-1 to the form 8-K dated May 3, 1995, filed
by Northern States Power Company, a Minnesota
corporation, (Securities and Exchange Commission File
No. 1-3034).
(99)-1 Press Release dated May 1, 1995, of Northern States
Power Company incorporated by reference from
Exhibit (99)-1 to the form 8-K dated May 3, 1995,
filed by Northern States Power Company, a Minnesota
corporation, (Securities and Exchange Commission File
No. 1-3034).
