Exhibit 99
December 30, 1996
Dear Shareholder:
I am pleased to announce that on December 29, 1996, Brooklyn Union
and the Long Island Lighting Company (LILCO) signed a definitive
agreement to merge in a tax-free transaction that will result in a
new holding company. A copy of the merger agreement has been filed
with the Securities and Exchange Commission.
The transaction will be accounted for as a pooling of interests and
is anticipated to increase earnings to Brooklyn Union shareholders
immediately after completion of the merger. A copy of the full
press release is attached to this letter.
This proposed transaction has been approved by both companies'
boards of directors and will eventually require your approval.
Because the combination will result in the formation of a new
holding company, Brooklyn Union will not pursue our plans to form
the KeySpan Energy Corporation, as we had originally envisioned.
Accordingly, the proposal to form that holding company has been
withdrawn, although it is extensively discussed in our summary
annual report, which was prepared prior to our decision to merge.
That holding company proposal, therefore, is not included in the
enclosed proxy statement.
I am very excited about the proposed merger. The transaction
offers shareholders of both companies the opportunity to
participate in the significant upside potential of the convergence
of gas and electric companies within the energy industry. In
particular, our combination with LILCO opens up the huge Long
Island market for Brooklyn Union. This market is particularly
attractive because there is an extremely low penetration of gas as
a percent of the total energy provision in that region. The
combination of the two companies will result in substantial synergy
savings in excess of $1 billion over ten years, making rates more
competitive. In addition, this transaction will help spur
increased regional business growth through lower energy prices and
enhanced energy-related products and services. As a result,
Brooklyn Union shareholders will benefit from the attractive growth
prospects resulting from access to more than one million customers
in an area with a population of 2.7 million people.
I am very enthusiastic about our company's future and am optimistic
that we will continue to grow and prosper in the competitive
marketplace. Thank you for your continued confidence in Brooklyn
Union.
Sincerely,
s/Robert B. Catell
Robert B. Catell
Chairman and Chief Executive Officer
FOR IMMEDIATE RELEASE
Contact for Brooklyn Union: Contact for LILCO:
Media: Robert Loftus/Robert Mahony Media: Elaine Davis
718-403-2503/718-403-2522 516-545-5052
Investors: Jan Childress Investors: William
Catacosinos, Jr.
718-403-3382 516-545-4688
BROOKLYN UNION AND LILCO ANNOUNCE PLAN
TO COMBINE COMPANIES
RATE SAVINGS IN EXCESS OF $1.0 BILLION ANTICIPATED
New York (December 29, 1996) -- Brooklyn Union Gas Company (NYSE:
BU) and The Long Island Lighting Company (LILCO) (NYSE: LIL)
announced today that they have signed a definitive agreement to
merge in a tax-free transaction resulting in a new holding company.
The combined market value of the two companies based on their
closing stock prices on Friday, December 27, 1996 is approximately
$4 billion. The transaction will be accounted for as a pooling of
interests.
The proposed transaction, which has been approved by both
companies' boards of directors, would unite Brooklyn Union, a gas
company with primary operations in gas distribution serving
Brooklyn, Queens and Staten Island, with LILCO, an electric and gas
company serving Nassau and Suffolk Counties and parts of Queens.
The new company, which has not yet been named, will serve
approximately 2.2 million customers and have revenues of more than
$4.5 billion.
Under the terms of the transaction, LILCO shareholders will receive
.803 shares of the new holding company's common stock for each
share of LILCO they currently hold. Brooklyn Union shareholders
will receive one share of the holding company's common stock for
each share of Brooklyn Union they currently hold. LILCO
shareholders will own approximately 66 percent of the common stock
of the new company while Brooklyn Union shareholders will own
approximately 34 percent. There are no changes with respect to
either company's public debt issues or outstanding preferred stock.
Upon completion of the merger, Dr. William J. Catacosinos,
currently chairman and chief executive officer of LILCO, will
become chairman and chief executive officer of the new holding
company; Mr. Robert B. Catell, currently chairman and chief
executive officer of Brooklyn Union, will become president and
chief operating officer of the new holding company. One year after
the closing, Mr. Catell will succeed Dr. Catacosinos as chief
executive officer, with Dr. Catacosinos continuing as chairman.
The board of directors of the new company will be composed of 15
members, six from Brooklyn Union and six from LILCO and three
additional persons previously unaffiliated with either company and
jointly selected by them.
Dr. Catacosinos said, "The combination of Brooklyn Union and LILCO
is positive for our customers, shareholders, and the communities we
serve. The consolidation of our neighboring companies will result
in synergy savings in excess of $1 billion over ten years, which
will provide rate reductions to customers. We will continue our
commitment to LILCO's electric customers, specifically to lowering
electric rates on Long Island. Together, we can help spur
increased regional business growth through lower energy prices and
enhanced energy-related products and services.
"The combined workforce will allow us to respond more effectively
to storm outages. Employees of both our companies will benefit
from being part of a larger, more competitive company well-
positioned in the emerging energy-services industry. Together, we
will be positioned to help our customers find business solutions
that optimize a broad array of energy products and services at
competitive prices," Dr. Catacosinos added.
The companies believe reductions related to synergies can be
accomplished without layoffs through attrition and other voluntary
separations.
Mr. Catell said, "Our combination with LILCO opens up the
substantial Long Island market for Brooklyn Union. This market is
particularly attractive because there is low penetration of gas as
a percent of the total energy provision in that region. Our
combined company would have an enhanced ability to provide its
broader customer base with competitive energy products and services
well into the future. The tradition of quality customer service
and community involvement, a hallmark of both Brooklyn Union and
LILCO, will continue unabated in the combined entity. Brooklyn
Union shareholders should enjoy immediate earnings accretion and
benefit from the long-term growth prospects inherent in the
combination."
Mr. Catell continued, "This transaction offers shareholders of both
companies the opportunity to participate in the significant upside
potential of the convergence of gas and electric companies within
the energy industry. LILCO and Brooklyn Union together will create
a platform to market, trade and arrange physical delivery of energy
products and services on a large scale to all major market areas.
Current and prospective customers will benefit greatly from the
opportunity to deal with an energy services company which can offer
one-stop shopping for the provision--and management--of their
energy needs. Brooklyn Union's subsidiary, KeySpan Energy
Management, headquartered in Jericho, New York, already operates
throughout the tri-state area and its sister company KeySpan Energy
Services sells natural gas to a growing customer base. The ability
to offer wraparound individualized services capable of encompassing
all customer needs--from management services to choice of fuel and
equipment, and ultimately appliance services--means a new day
indeed for an entire population of customers in our new market
area."
The companies noted that they will continue discussions with New
York State's Long Island Power Authority (LIPA) with respect to
LIPA's proposal to acquire certain LILCO assets, including its
regulatory assets. If an agreement with LIPA is reached, the terms
of the transaction with Brooklyn Union would be adjusted to reflect
that resolution. Brooklyn Union and LILCO will continue to work
with LIPA and state officials to substantially reduce rates to Long
Island electric customers beyond that which could be achieved by
the merger alone. Disposition of any portion of LILCO's assets to
LIPA must be agreed to by all three parties.
The companies will continue their current dividend policies
respectively, until the closing. It is expected that the new
company's dividend policy will be determined prior to closing.
The merger is conditioned upon the approval of each company's
common shareholders and various regulatory agencies including the
New York Public Service Commission, the Federal Energy Regulatory
Commission and the Securities and Exchange Commission. The
companies are hopeful that the regulatory approvals can be obtained
in 12 to 18 months.
Merrill Lynch & Co. is serving as financial advisor and has
provided a fairness opinion to Brooklyn Union. Dillon Read & Co.
Inc. is serving as financial advisor and has provided a fairness
opinion to LILCO.
Brooklyn Union, with approximately 3,000 employees, distributes
natural gas in the New York City boroughs of Brooklyn and Staten
Island and in two-thirds of the borough of Queens, and serves the
growing energy needs of 4 million residents. Brooklyn Union has
energy-related investments in gas exploration, production and
marketing in the United States and Canada, as well as energy
services in the United States, including cogeneration products,
pipeline transportation and gas storage.
LILCO's 5,400 employees provide electric and gas service to more
than 1 million customers in Nassau and Suffolk Counties and on the
Rockaway Peninsula in Queens County. LILCO's service territory
covers 1,230 square miles with a population of approximately 2.7
million people.
The press release includes forward looking statements
within the meaning of Section 21E of the Securities Exchange Act
of 1934. These forward looking statements reflect numerous
assumptions, and
involve a number of risks and uncertainties. Among the factors
that could cause actual results to differ materially are: electric
load and customer growth; abnormal weather conditions; available
sources and cost of fuel and generating capacity; the speed and
degree to which competition enters the power generation, wholesale
and retail sectors of the electric utility industry; state and
federal regulatory initiatives that increase competition, threaten
cost and investment recovery, and impact rate structures; the
ability of the combined company to successfully reduce its cost
structure; operating performance of nuclear generating facilities,
decommissioning costs associated with such facilities; the degree
to which the combined company develops nonregulated business
ventures; the economic climate and growth in the service
territories of the two companies; economies generated by the
merger; inflationary trends and interest rates and the other risks
detailed from time to time in the two companies' SEC reports.