SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
February 16, 1999
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Date of Report (Date of Earliest Event Reported)
SOUTH CAROLINA ELECTRIC & GAS COMPANY
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(Exact Name of Registrant as Specified in Charter)
South Carolina 1-3375 57-0248695
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(State of Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1426 Main Street
Columbia, South Carolina 29201
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(Address of Principal Executive Offices and Zip Code)
(803) 217-9000
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On February 16, 1999, SCANA Corporation, a South Carolina corporation
("SCANA"), Public Service Company of North Carolina, Incorporated, a North
Carolina corporation ("PSNC"), New Sub I, Inc., a South Carolina corporation and
a wholly-owned subsidiary of SCANA ("New Sub I"), and New Sub II, Inc., a South
Carolina corporation and a wholly-owned subsidiary of SCANA ("New Sub II"),
entered into an Agreement and Plan of Merger, dated as of February 16, 1999 (the
"Merger Agreement") providing for merger transactions among SCANA, PSNC, New Sub
I and New Sub II. SCANA is the parent company of South Carolina Electric & Gas
Company ("SCE&G"). The Merger Agreement and the press release issued in
connection therewith are filed herewith as Exhibits 10.1 and 99.1, respectively,
and are incorporated herein by reference. The description of the Merger
Agreement set forth herein does not purport to be complete and is qualified in
its entirety by the provisions of the Merger Agreement.
Pursuant to the Merger Agreement, (i) New Sub I will merge with and into
SCANA with SCANA being the surviving corporation (the "First Merger"), and
immediately thereafter, (ii) PSNC will merge with and into New Sub II (the
"Second Merger", and together with the First Merger, the "Mergers"), with New
Sub II surviving as a wholly-owned subsidiary of SCANA. The Mergers, which were
approved by the boards of directors of both SCANA and PSNC, are expected to
occur shortly after all of the conditions to the consummation of the Mergers,
including the receipt of certain regulatory approvals, are met or waived. The
regulatory approval process is expected to be completed by the end of 1999. If
the approval of the SEC under the Public Utility Holding Company Act of 1935, as
amended, has not been obtained by April 30, 2000, then the form of the Second
Merger will be revised to provide for the merger of PSNC into SCE&G with SCE&G
surviving as a wholly-owned subsidiary of SCANA (the "Alternative Second
Merger") and the parties will amend the terms of the Merger Agreement to make
them consistent with the Alternative Second Merger.
Under the terms of the Merger Agreement, each holder of PSNC's common stock
together with associated purchase rights, other than PSNC or any wholly-owned
subsidiary of PSNC or SCANA or any wholly-owned subsidiary of SCANA, will
receive either (i) $33.00 in cash for each share held by such holder (the "PSNC
Cash Consideration"), (ii) a number of shares of SCANA's common stock equal to
the PSNC Exchange Ratio (as defined below) for each share held by such holder
(the "PSNC Stock Consideration"), or (iii) a combination of PSNC Cash
Consideration and PSNC Stock Consideration in respect of each share held by such
holder. Each holder of PSNC common stock may elect to receive PSNC Cash
Consideration for their shares, subject to certain limitations.
The PSNC Exchange Ratio will be equal to $33.00 divided by either (i) the
average of the closing prices of SCANA common stock for each of the 20
consecutive trading days in the period ending on the deadline for electing the
form of consideration (the "Average Price") if such Average Price is no greater
than $32.40 and no less than $22.75,(ii) $32.40 if the Average Price of SCANA
common stock is greater than $32.40,in which case the PSNC Exchange Ratio will
equal 1.02 or (iii) $22.75 if the Average Price of SCANA common stock is less
than $22.75, in which case the PSNC Exchange Ratio will equal 1.45.
The PSNC Cash Consideration will represent a maximum of 50% of the total
consideration received by PSNC's shareholders, subject to adjustments (i) for
cash paid to holders of PSNC options and (ii) if necessary, to obtain favorable
tax treatment for shareholders of PSNC who receive SCANA common stock in the
Second Merger. In the event that shareholders of PSNC elect to receive more than
such amount of cash, the cash will be proportionately allocated among those
shareholders who have elected to receive cash.
Under the terms of the Merger Agreement, each holder of SCANA's
common stock other than SCANA or any wholly-owned subsidiary of SCANA or PSNC or
any wholly-owned subsidiary of PSNC, will receive either (i) $30.00 in cash for
each share held by such holder (the "SCANA Cash Consideration") or (ii) one
fully paid and non-assessable share of SCANA common stock for each share held by
such holder (the "SCANA Stock Consideration", and together with SCANA Cash
Consideration, the "SCANA Merger Consideration"). SCANA will allocate $700
million in cash for payment to PSNC shareholders and SCANA shareholders under
the election process. Dependent on the amount of cash elected by the
shareholders of PSNC, a minimum of approximately $350 million and a maximum of
$700 million will be allocated to SCANA shareholders who elect cash. If
shareholders of SCANA fail to elect to receive all of the cash allocated to
them, cash will be allocated among SCANA shareholders who have elected to
receive SCANA common stock. If shareholders of SCANA fail to elect to receive
all of the shares of SCANA common stock allocated to them, the shares will be
proportionately allocated among those who have elected to receive cash, other
than (i) holders of less than 100 shares of SCANA common stock or (ii) holders
who elect to receive SCANA Stock Consideration in respect of less than 100
shares of SCANA common stock, each of whom may receive cash in any event.
The Mergers are expected to be tax-free to stockholders of PSNC and SCANA
to the extent that they receive shares of SCANA common stock, and any cash
received is expected to be taxed as capital gain.
In conjunction with the Mergers, SCANA announced that its Board of
Directors has decided to adopt a common stock dividend policy to bring SCANA's
dividend payout ratio more in line with that of growth-oriented utilities.
SCANA's Board declared a dividend of 38 1/2 cents per share of common stock
for the first quarter of 1999, unchanged from the previous quarterly rate. The
dividend is payable April 1, 1999 to holders of record at the close of business
on March 10, 1999.
For the future, SCANA's Board revised the dividend policy to reflect a
dividend payout ratio of between 50 percent and 55 percent to be in line with
growth-oriented utilities as opposed to the current payout ratio of 70 percent
to 75 percent. Under the new policy, the Board anticipates declaring the current
dividend of 38 1/2 cents per share payable July 1, 1999 and reducing the
dividend to 27 1/2 cents per share, effective with the dividend to be paid
thereafter. This action would make SCANA's indicated annual dividend rate on
common stock $1.10 per share. Based on 1998 earnings of $2.12 per share, this
would equate to a 52 percent payout ratio. It is expected that the Board will
review the common stock dividend on an annual basis.
The Board of Directors of SCANA has received an opinion from its investment
banker, PaineWebber Incorporated, to the effect that, as of the date of the
Merger Agreement, the financial terms of the Mergers, taken as a whole, are
fair, from a financial point of view, to the holders of SCANA common stock.
The Mergers are subject to certain customary closing conditions, including
without limitation, (i) the receipt of the required approval of SCANA's
shareholders by an affirmative vote of two-thirds of the outstanding SCANA
common stock and of the PSNC shareholders by an affirmative vote of a majority
of the outstanding PSNC common stock, (ii) the receipt of all necessary
governmental approvals and the making of all necessary governmental filings,
including the approval of certain state utility regulators, all necessary
approvals of the Securities and Exchange Commission (the "SEC") under the Public
Utility Holding Company Act of 1935, as amended and (iii) 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. In
addition, the Mergers are conditioned upon the effectiveness of a joint proxy/
registration statement to be filed with respect to SCANA common stock to be
issued pursuant to the Mergers and to solicit shareholder votes for approval of
the Mergers. (See Article VIII of the Merger Agreement.) Stockholder meetings to
vote upon the Mergers will be convened as soon as practicable.
The Merger Agreement contains certain covenants of the parties pending the
consummation of the Mergers. Generally, the parties must carry on their
respective businesses in the usual, regular and ordinary course consistent with
past practice and use all commercially reasonable efforts to preserve intact
their respective present business organizations and goodwill. In addition,
PSNC's conduct is limited with respect to, among other things, payment of
dividends; issuance of securities; amendment of charter and bylaws;
acquisitions; dispositions; investments in joint ventures; capital expenditures;
incurrence of indebtedness; entrance into or amendment of employee compensation
and benefit plans; affiliate transactions; rate matters; gas transmission and
storage; contracts; and discharge of liabilities. SCANA's conduct is limited
with respect to, among other things, payment of dividends, acquisitions and
conduct of business of New Sub I and New Sub II. (See Article VI of the Merger
Agreement.)
The Merger Agreement provides that, after the effectiveness of the Mergers,
the corporate headquarters of the surviving corporation in the Second Merger
will be located in Columbia, South Carolina. SCANA will have three new directors
appointed to its board, one of whom will be Charles E. Zeigler, Jr., the current
Chairman, President and Chief Executive Officer of PSNC, the other two of whom
will be appointed from the current board of directors of PSNC with one
appointment being nominated by PSNC and one by SCANA. SCANA will create a three
person Office of the Chairman whose members will be (i) Mr. Zeigler, (ii) the
chairman, president and chief operating officer of SCANA and (iii) the President
of SCE&G. (See Article VII of the Merger Agreement.)
The Merger Agreement prevents PSNC, its subsidiaries and its
representatives from soliciting, initiating or encouraging (including by way of
furnishing information), or taking any other action designed to facilitate any
inquiries or the making of any offer or proposal, or engaging in negotiations
with, or providing any confidential information to, any third party relating to
an Acquisition Proposal to PSNC or any of its material subsidiaries (an
"Acquisition Proposal" as defined in Section 7.10 of the Merger Agreement) and
requires PSNC to immediately cease any existing activities discussions or
negotiations with any parties with respect to an Acquisition Proposal and to
notify SCANA of any inquiries relating to an Acquisition Proposal, unless prior
to PSNC's shareholder approval, (i) PSNC's Board of Directors determines in good
faith, based on the advice of outside legal counsel regarding such Board's
fiduciary duties under applicable law with respect to the Acquisition Proposal,
that it is necessary to do so in order to act in a manner consistent with its
fiduciary duties to the PSNC shareholders under applicable law; (ii) the Board
concludes, in good faith after consultation with its financial advisors, that
the third party making such Acquisition Proposal will have adequate sources of
financing to consummate such proposal and that such proposal, if consummated as
proposed, would be more favorable to shareholders of PSNC than the Mergers; and
(iii) prior to furnishing any nonpublic information or entering into
negotiations with or accepting such Acquisition Proposal, PSNC promptly notifies
SCANA of such furnishing of information or negotiations and enters into a
confidentiality agreement with such third party. In this situation and if
certain other conditions are met, PSNC may terminate the Merger Agreement. (See
Articles VII and IX of the Merger Agreement.)
The Merger Agreement may be terminated under certain circumstances,
including (i) by mutual consent of the Boards of Directors of PSNC and SCANA;
(ii) by either party if the Mergers are not consummated within 15 months from
the date of the Merger Agreement (the "Initial Termination Date"), provided,
that if the parties are otherwise ready to close but certain statutory approvals
have not yet been obtained, then the Initial Termination Date shall be extended
to the date that is 21 months from the date of the Merger Agreement; (iii) by
either party if either PSNC's or SCANA's stockholder approval is not obtained;
(iv) by either party if any law, order, rule or regulation makes the Mergers
illegal or any order or injunction permanently prohibits the Mergers; (v) by a
non-breaching party if a breach of any representation, warranty or covenant
contained in the Merger Agreement that results in a material adverse effect
occurs and is not cured within 20 business days of written notice, or (vi) by
either party if the board of the other party has withdrawn its approval of the
Merger Agreement or its recommendation to its shareholders. Furthermore, the
Merger Agreement may be terminated by PSNC if PSNC becomes the target of a
third-party Acquisition Proposal and the PSNC Board determines in good faith,
based upon the advice of outside legal counsel regarding such Board's fiduciary
duties under applicable law with respect to the Acquisition Proposal, that it is
necessary to terminate the Merger Agreement in order to act in a manner
consistent with its fiduciary duties, and concludes in good faith, after
consultation with its financial advisors, that such third party will have
adequate sources of financing to consummate such acquisition and that such
Acquisition Proposal, if consummated as proposed, would be more favorable to the
shareholders of PSNC than the Mergers, provided, that prior to any such
termination, PSNC must provide SCANA with proper notice and a reasonable
opportunity to adjust the terms of the Merger Agreement so as to enable PSNC to
proceed with the Mergers and to negotiate in good faith with SCANA with respect
to any such adjustments. (See Articles VII and IX of the Merger Agreement.)
The Merger Agreement provides that if a material breach (whether or not
willful) of any representation, warranty, covenant or agreement contained in the
Merger Agreement occurs or if the Board of either party withdraws its approval
or recommendation of the Merger Agreement to its shareholders, then the
non-breaching party is entitled to reimbursement of its out-of-pocket expenses
and fees, not to exceed a total of $5 million. Each party will also retain its
remedies at law and in equity, (which shall not be limited to $5 million),
provided, that in the event of a willful breach of the Merger Agreement by one
party, the amount to be recovered by the non-breaching party shall be no less
than $28 million. A termination fee of $28 million (minus any amounts as may
have been previously paid to SCANA for out-of-pocket expenses) will be payable
by PSNC to SCANA if (i) the Merger Agreement is terminated by PSNC because PSNC
became the target of an Acquisition Proposal and PSNC's Board determined that
termination was necessary in order to satisfy the Board's fiduciary obligations
to its shareholders, as described in more detail above or (ii) at the time of
termination PSNC has received an Acquisition Proposal and a transaction is
consummated with the party making such proposal (or an affiliate of such party)
within two years of PSNC's termination, and the Merger Agreement is terminated
(x) by PSNC or SCANA as a result of PSNC shareholders' approval not being
obtained or (y) by SCANA as a result of a breach of any representation, warranty
or covenant of PSNC which has not been cured. (See Article IX of the Merger
Agreement.)
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
10.1 Agreement and Plan of Merger, dated as of February 16, 1999, by
and among Public Service Company of North Carolina, Incorporated,
SCANA Corporation, New Sub I, Inc. and New Sub II, Inc.
99.1 Press Release of Public Service Company of North Carolina,
Incorporated and SCANA Corporation issued February 17, 1999.
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.
Date: February 26, 1999
SOUTH CAROLINA ELECTRIC & GAS COMPANY
By: M. R. Cannon
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M. R. Cannon
Treasurer
Exhibit Index
Exhibit Description
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10.1 Agreement and Plan of Merger, dated as of February 16, 1999, by and
among Public Service Company of North Carolina, Incorporated, SCANA
Corporation, New Sub I, Inc. and New Sub II, Inc.
99.1 Press Release of Public Service Company of North Carolina,
Incorporated and SCANA Corporation issued February 17, 1999.
