FOR IMMEDIATE RELEASE
Contacts for Ohio Edison: Contacts for Centerior Energy:
Media: Media:
Ralph J. DiNicola Todd Schneider
330-384-5939 216-447-3200
Investors: Investors:
Richard H. Marsh David M. Blank
330-384-5318 216-447-2701
Theodore F. Struck II Ron Seeholzer
330-384-5202 216-447-3339
Joele Frank / Judith Wilkinson
Abernathy MacGregor Group
212-371-5999
OHIO EDISON COMPANY AND CENTERIOR ENERGY CORP.
ANNOUNCE $4.8 BILLION MERGER
Akron, OH, September 16, 1996 -- Ohio Edison Company (NYSE:
OEC) and Centerior Energy Corp. (NYSE: CX) today announced that
they have signed a definitive agreement to merge in a tax-free,
stock-for-stock transaction resulting in a new holding company
named FirstEnergy Corp. The new holding company will have an
equity value of $4.8 billion based upon the closing of common stock
prices on Friday, September 13, 1996, of $20.75 per Ohio Edison
share and $7.625 per Centerior share. This transaction, which is
expected to be accounted for as a purchase, has been unanimously
approved by both companies' boards of directors. The companies
anticipate that the transaction will be accretive to earnings in
the first year after the completion of the merger.
The merger would create the nation's 11th largest investor-
owned electric system, based on annual electric sales of 64 billion
kilowatt-hours. FirstEnergy will serve 2.1 million customers
within 13,200 square miles of northern and central Ohio and western
Pennsylvania. As of June 30, 1996, the combined assets of Ohio
Edison and Centerior Energy were nearly $20 billion and annual
revenues totaled $5 billion.
Under the terms of the transaction, FirstEnergy Corp. will be
a holding company of Ohio Edison and Centerior Energy's operating
units, The Cleveland Electric Illuminating Company (CEI) and The
Toledo Edison Company. Pennsylvania Power Company will remain a
wholly owned subsidiary of Ohio Edison. Ohio Edison shareholders
will receive one share of FirstEnergy's common stock for each share
of Ohio Edison common stock that they currently hold. Centerior
Energy shareholders will receive a 0.525 share of FirstEnergy's
common stock for each share of Centerior common stock that they
currently hold.
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Benefits of the Merger
Willard R. Holland, president and chief executive officer of
Ohio Edison and chairman of Pennsylvania Power, said, "This merger
creates a larger enterprise with more resources to enhance near-
term and long-term value to shareholders, provide better service at
lower prices to customers, and offer more career opportunities to
employees than if the companies remained separate. By sharing our
employees' skills and each company's best practices, the
combination will also enable us to realize substantial economic
synergies that will further enhance our cash flow and efforts to
accelerate debt reduction."
Robert J. Farling, chairman and chief executive officer of
Centerior Energy, said, "This is a win-win-win for our companies,
our customers and our shareholders. Together, we form a larger,
stronger competitor, which is essential to our success as our
industry continues to evolve. Our alliance will provide our
customers and shareholders with more value and our employees with
more opportunities than would be possible if we did not join
forces."
Mr. Holland continued, "FirstEnergy will be able to provide
customers with a wider range of energy services and enhanced
service restoration capabilities, key advantages as our industry
becomes more competitive. In addition, we intend to propose a plan
to extend to CEI and Toledo Edison customers a rate reduction
program similar to Ohio Edison's. The plan would call for a freeze
of CEI and Toledo Edison rates through 2005, a rate reduction of
$300 million, or approximately 15 percent, in 2006, and accelerated
depreciation of $2 billion in fixed costs during that period.
"Our merger also gives us increased flexibility to maximize
the operating efficiency of the generating units that our companies
share ownership in through the CAPCO arrangements," Mr. Holland
said. "This flexibility, along with the synergies we expect from
the merger and our intended rate plan, will help us reduce
financial risks related to stranded investments in a more
competitive electric industry."
The Central Area Power Coordination Group (CAPCO) is comprised
of the companies and Duquesne Light Company. FirstEnergy will have
complete or majority ownership and operational control of seven
CAPCO units - Bruce Mansfield Units 1, 2 and 3; Sammis Unit 7;
Eastlake Unit 5; Davis Besse Unit 1; and Perry Unit 1 - as well as
majority ownership of Beaver Valley Units 1 and 2.
Mr. Farling continued, "The combination of our contiguous
service areas is a natural. Our service areas are located within
a 500-mile radius of one-half of the U.S. population. We serve
several areas that site selection experts have listed among the
nation's most successful in recent years for attracting
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manufacturing locations and expansions. Together, we can help
our communities attract jobs over a wider and more diverse region,
which is served by an extensive infrastructure that includes ten
major airports, portions of all major interstate highways in Ohio,
multiple free-trade zones, abundant water supplies and a highly
integrated network of electrical facilities."
Mr. Farling said, "FirstEnergy will continue the strong
traditions of both companies for supporting their local communities
through financial contributions and through the extensive
volunteerism of their employees. In addition, our alliance will
make us Ohio's largest taxpayer, with some $516 million in annual
payments, as well as one of the state's largest employers."
Savings from the Merger
The companies expect savings related to the merger of
approximately $1 billion over the first ten years. The savings
will come from the elimination of duplicative activities, improved
operating efficiencies, lower capital costs, and the combination of
the companies' work forces. In addition to efforts to achieve
appropriate staffing levels already underway at the companies, work
force reductions resulting from the merger are expected to be
approximately 900 positions out of the companies' current total
work force of approximately 11,000. The companies will seek to
minimize the effect of these reductions by hiring limits, attrition
and separation programs. All labor agreements will be honored.
In addition, the companies' ongoing cost reduction and
efficiency improvement programs will be available for
implementation throughout the new organization. Through such
programs, reductions in new capital requirements, and lower
overheads resulting from the combination of operations, FirstEnergy
expects to set an aggressive goal of reducing debt by $2.5 billion
through the year 2000.
Dividend Policy
It is anticipated that the initial annual dividend on
FirstEnergy's common stock will be the same as Ohio Edison's annual
dividend, which is currently $1.50 per share. Based on the share
exchange rate at this dividend level, Centerior Energy shareholders
will be provided approximately the same dividend income they now
receive on Centerior shares. Centerior Energy's current annual
dividend is $0.80 per share of common stock.
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Management and Operating Unit Structure
FirstEnergy will be a public utility holding company that will
be the parent of Ohio Edison and its subsidiary, Pennsylvania
Power; CEI; and Toledo Edison. The corporate headquarters of the
holding company will be in Akron, Ohio. It is anticipated that the
principal offices of the operating companies will remain at their
current locations.
Willard R. Holland, president and chief executive officer of
Ohio Edison and chairman of Pennsylvania Power, will become
chairman of the board, president and chief executive officer of
FirstEnergy. Robert J. Farling, chairman, president and chief
executive officer of Centerior Energy, will become vice chairman of
FirstEnergy. The board of directors of FirstEnergy will be
designated by Ohio Edison's board.
Approvals and Timing
The merger is conditioned, among other things, upon the
approval of each company's shareholders and various regulatory
agencies, including the Federal Energy Regulatory Commission, the
Nuclear Regulatory Commission, and the Securities and Exchange
Commission. Actions in Ohio and Pennsylvania that may be needed to
complete the merger will be undertaken as required. The companies
are hopeful that the merger can be completed by the end of 1997.
Morgan Stanley & Co. Incorporated is serving as financial
advisor to both companies. McDonald & Company Securities, Inc.
provided a fairness opinion to Ohio Edison. Barr Devlin & Co.
Incorporated also served as a financial advisor to Centerior and
provided Centerior a fairness opinion.
Centerior Energy, headquartered in Independence, Ohio, is the
holding company for The Cleveland Electric Illuminating Company and
The Toledo Edison Company. Together, they serve more than one
million customers within 4,200 square miles of northern Ohio. Ohio
Edison Company, headquartered in Akron, Ohio, and its subsidiary,
Pennsylvania Power Company, headquartered in New Castle,
Pennsylvania, serve 1.1 million customers within 9,000 square miles
of northeastern and central Ohio and western Pennsylvania.
This 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
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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
and decommissioning costs of such facilities; 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.
www.ohioedison.com
www.centerior.com