<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[x] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
OHIO EDISON COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
February 12, 1997
(FirstName) (LastName)
(Title)
(Company)
(Address1)
(Address2)
(City), (State) (Zip)
Dear FirstName:
Enclosed for your use is a courtesy copy of the Proxy Statement for
FirstEnergy Corp. A special meeting of shareholders will be held on March 27 to
vote on the proposed merger of Ohio Edison Co. and Centerion Energy and the
formation of FirstEnergy, a new holding company. Please note that the actual
Proxy Card and Statement will be provided to you by the custodian or their
mailing agent, ADP.
This transaction will produce significant value for our shareholders
and improve our competitive position in the rapidly evolving energy marketplace.
Advantages of the merger include:
- Enhanced earnings and cashflow
- Synergies of at least $1 billion during the first ten years of the
transaction,
- Increased control over jointly-owned generating assets, and
- An accelerated debt reduction program.
We sincerely appreciate your ownership in Ohio Edison Company and hope
that we can count on your "Yes" vote for the merger. If you have any questions
or would like to discuss the transaction further, please call me at (330)
384-5838 or contact any of my associates:
Rich Marsh, Treasurer, (330) 384-5318
Ted Struck, Assist. Treasurer and Assist. Secretary, (330) 384-5202
Greg LaFlame, Manager, Investor Relations, (330) 384-5500
Sincerely,
<PAGE> 3
MERGER PRESENTATION TO
EMPLOYEES
We're meeting today because we want you to have the information you need to make
well-informed decisions about our Company's future, and to explain why we
believe that the Ohio Edison-Centerior merger deserves your support.
Prior to registration with the Securities and Exchange Commission, we were
restricted by law concerning what we could say about the merger to our
shareholders, and that group includes most of you.
<PAGE> 4
2
We realize that's been frustrating for employees, who have a big stake in what's
going on.
Now that our proxy statement has been mailed, we can talk openly.
As you know, our business is changing rapidly - and mergers are an inevitable
part of this change. Many mergers are already taking place in our industry.
I know many of you are concerned about how this merger will affect your jobs.
We've announced a reduction of an estimated 900 jobs out of a combined work
force of about 11,000.
<PAGE> 5
3
I can tell you that, in any merger, it's better to be the company picking the
right time and the right partner - and the one calling the shots. We're doing
this merger on our terms, and our CEO, Will Holland, and our Board are in
charge.
Voting against our merger because you are concerned about your job would be
shortsighted. The greater risk would be for us to take a "business as usual"
approach. We're much better off working for a larger, stronger, more competitive
company - and that's exactly what we will accomplish through the merger.
<PAGE> 6
4
Keep in mind, customers create jobs - not companies, and we're doubling our
customer base through the merger. In addition, as the 11th largest
investor-owned electric system in the country, it will be much more difficult
for another utility to take us over.
The situation would be much different for all of us if we were being acquired
and we were not in a position of strength to negotiate the terms of the
agreement.
Our merger is a natural alliance that makes sense. FirstEnergy will be better
positioned to compete and succeed in a changing energy business. Here are some
of the reasons why:
<PAGE> 7
5
OVERHEAD #1
- -----------
- - STRONG ELECTRIC SALES -- 64 billion kilowatt-hours annually vs. 34 billion
kWh for Ohio Edison.
- - ATTRACTIVE PROSPECTS FOR FUTURE GROWTH -- 2.1 million customers - double
what we have now, and a 13,200-square-mile service area that is one of the
nation's leaders in attracting new businesses due to a better mix of
location sites and infrastructure.
- - GREATER FINANCIAL RESOURCES -- $5 billion in annual revenues compared to
our $2.5 billion, and more than $18 billion in assets vs. Ohio Edison's $9
billion.
<PAGE> 8
6
- - RELIABLE POWER SUPPLIES - 11,681 megawatts of generating capability
compared to our 5,757 MW.
OVERHEAD #2
- -----------
- - STRATEGIC LOCATION - within a 500-mile radius of one-half of the U.S.
population, which will be a key asset in a competitive market.
- - STRONGER TRANSMISSION NETWORK -- 6,500 miles of transmission lines, a
42-percent increase - and 57 interconnections with 8 other electric
systems. That means greater access to outside markets and new customers.
<PAGE> 9
7
- - BETTER OPPORTUNITIES FOR OFF-SYSTEM ELECTRIC SALES - including growing
markets in Canada and the eastern part of the country.
OVERHEAD #3
- -----------
For these and other reasons, a number of financial analysts have supported the
merger. Certainly not all of them have come out in favor of it, but we don't
know of any who oppose it. Here are a few examples of those who support it:
- - "We believe that the merger will be very positive for both companies,
simply because neither of them could have reached real value separately."
- Daniele M. Seitz, UBS Securities
<PAGE> 10
8
- - "We view the merger favorably for the shareholders of both companies over
the long term." - Dan Rudakas, Everen Securities, Inc.
- - "Ohio Edison/FirstEnergy Corp. is guided by an above average management
team that has implemented a proactive strategy that should favorably
position the company in a deregulated environment. This is emphasized by
management's successful track record on controlling costs, reducing debt,
and creative strategies focused on improving the company's financial
position." - Andrew Redinger, NatCity Investments, Inc.
<PAGE> 11
9
OVERHEAD #4
- -----------
- - "Based on our analysis, the merger would enhance the long-term prospects
for earnings and dividend growth and strengthen Ohio Edison's competitive
position." - Linda Byus, Nesbitt Burns Securities.
In addition, the following analysts issued positive recommendations on Ohio
Edison common stock since our merger announcement:
- - Everen Securities (Long-term outperformer)
- - Merrill Lynch (Accumulate)
- - NatCity Investments (Long-term buy)
- - Nesbitt Burns (Buy)
- - Wheat First Butcher Singer (Buy)
<PAGE> 12
10
Look at our stock performance since the merger was announced in September.
OVERHEAD #5
- -----------
As you can see from this overhead, we experienced an initial dip in our stock
price immediately following the merger announcement. This is not unusual for any
acquiring company in a merger.
However, since that dip, we have been outperforming the S&P Utilities Index. We
believe this shows the financial community agrees that the merger makes sense.
<PAGE> 13
11
And, we've been consistently outperforming the Index over the past few years.
OVERHEAD #6
- -----------
The merger makes sense for employees, because it means better career
opportunities over the long term. We'll be a stronger company, much stronger
than if we had remained separate.
We'll also have greater control of the generating assets that our companies
share ownership in through CAPCO, which will increase our flexibility to
maximize the efficiency of these units.
<PAGE> 14
12
For many of the same reasons, the merger is good for shareholders. It will
create a more competitive utility and enhance the near-term and long-term value
of their investment. In fact, we expect earnings and cash flow growth beginning
in the first year of the merger.
Why? Among other factors, our earnings will benefit from at least $1 billion in
savings that will result from the efficiencies made possible through our shared
operations.
<PAGE> 15
13
In addition, the rate plans in place for Ohio Edison, Penn Power and Centerior
will enable FirstEnergy to reduce our costs of nuclear investments and
regulatory assets - that is, equipment and facilities that have been approved
for recovery but currently aren't reflected in our rates - by an additional $4.3
billion through 2005.
OVERHEAD #7
- -----------
Some of you may still wonder, why have we agreed to pay a premium for Centerior?
<PAGE> 16
14
First of all, a premium was required to complete the deal - and we were taking
advantage of a brief window of opportunity. We didn't know what was going to
happen to Centerior, but we knew something would - and it probably wouldn't be
good for us, unless we were the acquiring utility.
As our Board of Directors decided, Centerior is a good value at the price we're
paying, which provides adequate resources to support earnings and dividend
growth.
Keep in mind, this is an acquisition, not a true merger - you pay a premium for
that control.
<PAGE> 17
15
But it was still a price we could afford -- given Centerior's depressed stock
price at that time, as well as the value represented by its customers. In fact,
we paid a very favorable price for Centerior's one-million customers -- $1,500
for each of its customers compared to a range of $2,000 to $4,000 paid in most
utility mergers in the U.S. Outside our country, the range is $3,000 to $4,000
for utility purchases that don't even include electrical facilities.
We also saw significant synergies from combining our operations that would make
the deal better for us than for any other utility.
<PAGE> 18
16
OVERHEAD #8
- -----------
As you can see from this overhead, the premium was about 12 percentage points
higher than utility transactions involving higher-than-average premiums. But
that's only part of the story.
Now look at the price-earnings multiple, which is the market price as a multiple
of earnings per share. A lower multiple represents a more favorable purchase
price for the acquiring company. As you can see, Centerior's multiple is much
lower than the average for these mergers.
<PAGE> 19
17
The same holds true for cash flow. And in Centerior's case, they have a very
healthy cash flow, which will enable us to accelerate our debt-reduction
efforts.
In fact, the merger will enable us to reduce debt much more quickly than we
could on our own.
OVERHEAD #9
- -----------
Prior to announcing the merger, Ohio Edison's debt reduction goal was
approximately $1 billion by the year 2000. Likewise, Centerior's goal was $1.3
billion.
<PAGE> 20
18
Through the merger, the debt-reduction program for both companies is expected to
exceed $2.5 billion - or $200 million more than both companies' previous goals
combined. This will lower our combined interest costs nearly $240 million
annually by 2001.
OVERHEAD #10
- ------------
The merger is also good for customers, because it will provide better service at
lower prices. For example, our rate plans will enable FirstEnergy to reduce
customer rates by $1 billion through 2005 while offering greater support for
local communities.
And increasing our value to shareholders and customers is essential as we
prepare for the changes ahead of us.
<PAGE> 21
19
OVERHEAD #11
- ------------
Mergers are part of that change - and they're nothing new to our Company.
Ohio Edison is actually made up of some 300 small companies that have merged
over the past century.
The last merger occurred in 1950 when Ohio Edison joined forces with Ohio Public
Service.
Mergers made us a stronger company over the years. This merger is no different.
<PAGE> 22
20
Once again:
- - We'll double our customer base
- - Increase our service area by 45%
- - Double our kilowatt-hour sales
- - Double our revenues, and
- - Increase opportunities for our employees
At Ohio Edison, we have what it takes to win in a competitive environment. And
that experience will lead to FirstEnergy's success.
<PAGE> 23
21
OVERHEAD #12
- ------------
But the merger hinges on the shareholder approvals of both companies.
- - For Centerior, a simple majority is needed.
- - Ohio Edison needs approval by holders of at least two-thirds of our common
stock.
Every vote is important. We need your support - as employees and as shareholders
through the Company's Savings Plan.
We ask that you read the proxy information carefully, vote FOR the merger, and
return the proxy.
<PAGE> 24
22
In addition, we encourage you to spread the word about the importance of the
merger with your co-workers, retirees and any other shareholders you know. As
employee-shareholders, voting for the merger helps create a company that's
better positioned to compete and succeed.
OVERHEAD #13
- ------------
Let's face facts: Mergers and acquisitions will occur in our business as it is
deregulated. It's happened in every other deregulated industry, from banking to
transportation.
<PAGE> 25
23
If our merger fails, we would expect to be an increasingly attractive merger
candidate as we continue to improve our performance and financial condition.
We need to position our company to control its destiny.
OVERHEAD #14
- ------------
In summary, this merger makes sense:
- - We'll achieve higher earnings-per-share and cash flow than we could on our
own.
- - We'll accelerate our progress in maximizing the efficiency of our
operations and reducing our debt.
<PAGE> 26
24
- - Based on key financial measurements, the value of this transaction is
strong.
- - Employees will have greater career opportunities working for a larger,
stronger company.
- - This is our deal - and we're doing it on our own terms.
QUESTION AND ANSWER SESSION
<PAGE> 27
25
OVERHEAD #1:
BENEFITS OF MERGER
- - STRONG ELECTRIC SALES -- 64 BILLION KWH ANNUALLY FOR FIRSTENERGY VS. 34
BILLION KWH FOR OHIO EDISON
- - ATTRACTIVE PROSPECTS FOR FUTURE GROWTH -- 2.1 MILLION CUSTOMERS - DOUBLE
WHAT WE HAVE NOW, AND A 13,200-SQUARE-MILE SERVICE AREA THAT IS ONE OF THE
NATION'S LEADERS IN ATTRACTING NEW BUSINESSES
- - GREATER FINANCIAL RESOURCES -- $5 BILLION IN ANNUAL REVENUES COMPARED TO
OUR $2.5 BILLION - AND MORE THAN $18 BILLION IN ASSETS VS. OHIO EDISON'S
$9 BILLION
- - RELIABLE POWER SUPPLIES -- 11,681 MW OF GENERATING CAPABILITY COMPARED TO
OUR 5,757 MW
<PAGE> 28
26
OVERHEAD #2:
BENEFITS OF MERGER (CONT.)
- - STRATEGIC LOCATION -- WITHIN A 500-MILE RADIUS OF ONE-HALF OF THE U.S.
POPULATION - A KEY ASSET IN A COMPETITIVE MARKET
- - STRONGER TRANSMISSION NETWORK -- 6,500 MILES OF TRANSMISSION LINES, A
42-PERCENT INCREASE - AND 57 INTERCONNECTIONS WITH 8 OTHER ELECTRIC
SYSTEMS
- - BETTER OPPORTUNITIES FOR OFF-SYSTEM ELECTRIC SALES -- INCLUDING GROWING
MARKETS IN CANADA AND THE EASTERN PART OF THE COUNTRY
<PAGE> 29
27
OVERHEAD #3:
RESPONSE FROM ANALYSTS
A NUMBER OF MARKET ANALYSTS SUPPORT THE MERGER. NOT ALL OF THEM HAVE COME OUT IN
FAVOR OF IT, BUT WE DON'T KNOW OF ANY WHO ACTUALLY OPPOSE IT. HERE ARE EXAMPLES
OF THOSE WHO SUPPORT IT:
- - "WE BELIEVE THAT THE MERGER WILL BE VERY POSITIVE FOR BOTH COMPANIES,
SIMPLY BECAUSE NEITHER OF THEM COULD HAVE REACHED REAL VALUE SEPARATELY."
- DANIELE M. SEITZ, UBS SECURITIES
- - "WE VIEW THE MERGER FAVORABLY FOR THE SHAREHOLDERS AND CUSTOMERS OF BOTH
COMPANIES OVER THE LONG TERM." - DAN RUDAKAS, EVEREN SECURITIES, INC.
- - "OHIO EDISON/FIRSTENERGY CORP. IS GUIDED BY AN ABOVE AVERAGE MANAGEMENT
TEAM THAT HAS IMPLEMENTED A PROACTIVE STRATEGY THAT SHOULD FAVORABLY
POSITION THE COMPANY IN A DEREGULATED ENVIRONMENT. THIS IS EMPHASIZED BY
MANAGEMENT'S SUCCESSFUL TRACK RECORD ON CONTROLLING COSTS, REDUCING DEBT,
AND CREATIVE STRATEGIES FOCUSED ON IMPROVING THE COMPANY'S FINANCIAL
POSITION." - ANDREW REDINGER, NATCITY INVESTMENTS, INC.
<PAGE> 30
28
OVERHEAD #4:
RESPONSE FROM ANALYSTS (CONT.)
- - "BASED ON OUR ANALYSIS, THE MERGER WOULD ENHANCE THE LONG-TERM PROSPECTS
FOR EARNINGS AND DIVIDEND GROWTH AND STRENGTHEN OHIO EDISON'S COMPETITIVE
POSITION." - LINDA BYUS, NESBITT BURNS SECURITIES
- - POSITIVE RECOMMENDATIONS ON OEC COMMON STOCK FOLLOWING MERGER
ANNOUNCEMENT:
-- EVEREN SECURITIES (LONG-TERM OUTPERFORMER)
-- MERRILL LYNCH (ACCUMULATE)
-- NATCITY INVESTMENTS (LONG-TERM BUY)
-- NESBITT BURNS (BUY)
-- WHEAT FIRST BUTCHER SINGER (BUY)
<PAGE> 31
OVERHEAD #5:
OEC VS S & P UTILITIES
INDEX
[GRAPHIC]
<PAGE> 32
30
OVERHEAD #6
MERGER GOOD FOR EMPLOYEES, SHAREHOLDERS
- - GOOD FOR EMPLOYEES - BETTER CAREER OPPORTUNITIES OVER THE LONG TERM
-- STRONGER COMPANY: MUCH STRONGER THAN IF WE HAD REMAINED SEPARATE
-- GREATER CONTROL OF GENERATING ASSETS WE SHARE OWNERSHIP IN THROUGH CAPCO
- - GOOD FOR SHAREHOLDERS: WILL CREATE A STRONGER, MORE COMPETITIVE UTILITY
AND ENHANCE THE NEAR- AND LONG-TERM VALUE OF THEIR INVESTMENT
-- EARNINGS AND CASH FLOW GROWTH BEGINNING IN THE FIRST YEAR OF THE MERGER
-- AT LEAST $1 BILLION IN SAVINGS FROM EFFICIENCIES MADE POSSIBLE THROUGH
OUR SHARED OPERATIONS
-- REDUCE OUR COSTS OF NUCLEAR AND REGULATORY ASSETS BY AN ADDITIONAL $4.3
BILLION THROUGH 2005
<PAGE> 33
31
OVERHEAD #7:
WHY PAY A PREMIUM?
- - PREMIUM REQUIRED TO COMPLETE THE DEAL - AND WE WERE TAKING ADVANTAGE OF
BRIEF WINDOW OF OPPORTUNITY
- - PURCHASE PRICE REPRESENTS GOOD VALUE AND PROVIDES ADEQUATE RESOURCES TO
SUPPORT EARNINGS AND DIVIDEND GROWTH
- - ACQUISITION, NOT A TRUE MERGER - YOU PAY A PREMIUM FOR THAT CONTROL... IT
WAS STILL A PRICE WE COULD AFFORD
- - FAVORABLE PRICE FOR CENTERIOR'S CUSTOMERS:
-- $1,500 FOR EACH CENTERIOR CUSTOMER, VS. A RANGE OF $2,000 TO $4,000
FOR MOST U.S. UTILITY MERGERS
- - OUTSIDE THE U.S., THE RANGE IS $3,000 TO $4,000 FOR UTILITY PURCHASES
THAT DON'T INCLUDE FACILITIES
- - WE ALSO SAW SIGNIFICANT SYNERGIES FROM COMBINING OUR OPERATIONS THAT MADE
THE DEAL BETTER FOR US
<PAGE> 34
OVERHEAD #8:
PREMIUM VALUATION COMPARISON
<TABLE>
<CAPTION>
UTILITY TRANSACTIONS
WITH
SIGNIFICANT PREMIUMS CX
-------------------- --------
<S> <C> <C>
Premium 30.5% 42.9%
Price-Earning Multiple 15.4x 9.8x
Cash Flow Multiple 6.4X 2.5X
</TABLE>
<PAGE> 35
OVERHEAD #9:
ACCELERATE DEBT REDUCTION
(YEAR 200 GOAL)
[GRAPHIC]
(in billions)
PRE-MERGER
CX $ 1.3
OEC $ 1.0
------
$ 2.3
FIRSTENERGY $ 2.5
<PAGE> 36
34
OVERHEAD #10:
MERGER GOOD FOR CUSTOMERS
- - WILL PROVIDE BETTER SERVICE AT LOWER PRICES
- - RATE PLANS WILL ENABLE FIRSTENERGY TO REDUCE CUSTOMER RATES BY $1 BILLION
THROUGH 2005 WHILE OFFERING GREATER SUPPORT FOR LOCAL COMMUNITIES
- - INCREASING OUR VALUE TO CUSTOMERS IS ESSENTIAL AS WE PREPARE FOR CHANGES
AHEAD
<PAGE> 37
35
OVERHEAD #11:
MERGERS: PAST AND PRESENT
- - OHIO EDISON IS MADE UP OF SOME 300 SMALL COMPANIES THAT HAVE MERGED OVER
THE PAST CENTURY
- - LAST MERGER OCCURRED IN 1950 WHEN OHIO EDISON JOINED FORCES WITH OHIO
PUBLIC SERVICE
- - MERGERS MADE US A STRONGER COMPANY OVER THE YEARS - THIS ONE NO DIFFERENT
- - WE'LL DOUBLE OUR CUSTOMER BASE... INCREASE OUR SERVICE AREA BY 45%...
DOUBLE OUR KILOWATT-HOUR SALES... DOUBLE OUR REVENUES... AND INCREASE
OPPORTUNITIES FOR OUR EMPLOYEES
<PAGE> 38
36
OVERHEAD #12:
SHAREHOLDER APPROVALS REQUIRED
- - FOR CENTERIOR: SIMPLE MAJORITY IS NEEDED
- - OHIO EDISON NEEDS APPROVAL BY HOLDERS OF AT LEAST TWO-THIRDS OF OUR COMMON
STOCK
- - WE NEED EVERY VOTE: WE ASK THAT YOU READ ALL PROXY INFORMATION CAREFULLY,
VOTE FOR THE MERGER, AND RETURN THE PROXY
- - SPREAD THE WORD WITH CO-WORKERS, RETIREES AND OTHER SHAREHOLDERS
<PAGE> 39
37
OVERHEAD #13:
OUR MERGER IS IMPORTANT
- - VOTING FOR THE MERGER HELPS CREATE A COMPANY BETTER POSITIONED TO COMPETE
AND SUCCEED IN A RAPIDLY CHANGING UTILITY INDUSTRY
- - MERGERS WILL OCCUR IN OUR INDUSTRY AS IT IS DEREGULATED
-- IF OUR MERGER FAILS, WE COULD EXPECT TO BE AN INCREASINGLY ATTRACTIVE
MERGER CANDIDATE AS WE CONTINUE TO IMPROVE OUR PERFORMANCE AND
FINANCIAL CONDITION
- - WE NEED TO POSITION OUR COMPANY TO CONTROL ITS DESTINY
<PAGE> 40
38
OVERHEAD #14:
SUMMARY
THIS MERGER MAKES SENSE:
- - WE'LL ACHIEVE HIGHER EARNINGS-PER-SHARE AND CASH FLOW THAN WE COULD ON OUR
OWN
- - WE'LL ACCELERATE OUR PROGRESS IN MAXIMIZING THE EFFICIENCIES OF OUR
OPERATIONS AND REDUCING OUR DEBT
- - BASED ON KEY FINANCIAL MEASUREMENTS, THE VALUE OF THIS TRANSACTION IS
STRONG
- - EMPLOYEES WILL HAVE GREATER CAREER OPPORTUNITIES WORKING FOR A LARGER,
STRONGER COMPANY
- - THIS IS OUR DEAL - AND WE'RE DOING IT ON OUR OWN TERMS
