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) August 22, 1995
PUBLIC SERVICE COMPANY OF COLORADO
________________________________________
(exact name of registrant as specified in charter)
Colorado
____________________
(State or other jurisdiction
of incorporation)
1-3280 84-0296600
________________ _________________
(Commission File No.) (IRS Employer
Identification No.)
1225 Seventeenth Street, Denver, Colorado 80202
__________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 571-7511
ITEM 5. Other Events
Public Service Company of Colorado, a Colorado corporation ("PSC"),
Southwestern Public Service Company ("SPS"), a New Mexico corporation, and
M-P New Co., (the "Company" or "Newco"), a newly formed Delaware
corporation, have entered into an Agreement and Plan of Reorganization,
dated August 22, 1995, (the "Merger Agreement") providing for a business
combination as peer firms involving PSC and SPS in a "merger of equals"
transaction (the "Merger"). The Merger, which was unanimously approved by
the Boards of Directors of the constituent companies, is expected to occur
shortly after all of the conditions to the consummation of the Merger,
including obtaining applicable regulatory approvals, are met or waived.
The regulatory approval process is expected to take approximately 12 to 16
months.
The Merger Agreement and the press release issued in connection therewith
are filed herewith as exhibits 2 and 99, and are incorporated by
reference herein. 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.
As part of the Merger, the holding company of the combined enterprise will
be registered under the Public Utility Holding Company Act of 1935, as
amended ("1935 Act"). The Company, which will serve as the holding
company, will be renamed at a later date and will be the parent company of
both PSC and SPS.
Under the terms of the Merger Agreement, New PSC will be merged with and
into PSC and New SPS will be merged with and into SPS. PSC and SPS shall
be the surviving corporations and shall continue their corporate
existence under the laws of the State of Colorado and the State of New
Mexico, respectively. As a result of the mergers, both PSC and SPS will
become subsidiaries of Newco. Each outstanding share of PSC Common Stock,
par value $5.00 per share, will be canceled and converted into the right
to receive 1.00 share(s) of Newco common stock par value $1.00 per share,
and each outstanding share of SPS Common Stock, par value $1.00 per share,
will be canceled and converted into the right to receive 0.95 share(s) of
Newco Common Stock. As of August 4, 1995, PSC had 63.1 million common
shares outstanding and SPS had 40.9 million common shares outstanding.
Based on such capitalization, the Merger would result in the common
shareholders of PSC owning 61.9% of the common equity of Newco and the
common shareholders of SPS owning 38.1% of the common equity of Newco.
The Merger Agreement and the Merger will not affect the outstanding debt,
including mortgage bonds, and shares of preferred stock of PSC and SPS.
It is anticipated that Newco will adopt the SPS dividend payment level,
adjusted for the exchange ratio. SPS currently pays $2.20 per share
annually and PSC's current annual dividend rate is $2.04 per share.
Based on the exchange ratio, the proforma dividend for the Company would
be $2.32 per share on an annual basis, following completion of the Merger.
The Company's common stock dividend level will be dependent upon the
Company's results of operations, financial position, cash flows and other
factors, and will be evaluated by the Board of Directors.
The Merger is subject to customary closing conditions, including, without
limitation, the receipt of required shareholder approvals of PSC and SPS;
and the receipt of all necessary governmental approvals and the making of
all necessary governmental filings, including approvals and findings of
state utility regulators in Colorado, Texas, New Mexico, Oklahoma, Wyoming
and Kansas and the approval of the Federal Energy Regulatory Commission,
the Securities and Exchange Commission (the "SEC") under the 1935 Act,
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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 Merger is also subject to the receipt of opinions of counsel that the
transaction will qualify as a tax-free reorganization, and the assurances
from the parties' independent accountants that the Merger will qualify as
a pooling of interests for accounting purposes. In addition, the Merger
is conditioned upon the effectiveness of a registration statement to be
filed with the SEC with respect to the Newco Common Stock to be issued in
the transaction and the approval for listing of such shares on the New
York Stock Exchange. Shareholder meetings to vote upon the Merger will be
convened as soon as practicable and are expected to be held in the first
quarter of 1996.
The Merger Agreement provides that, after the effectiveness of the
transaction (the "Effective Time"), the corporate offices of Newco will be
located in Denver, Colorado with significant operating functions based in
Amarillo, Texas. PSC and SPS will maintain their company headquarters in
Denver and Amarillo, respectively. Newco's Board of Directors will
consist of a total of 14 directors, 8 of whom will be designated by PSC
and 6 of whom will be designated by SPS. At the Effective Time, Delwin D.
Hock, Chairman of the Board and Chief Executive Officer ("CEO") of PSC
will retire. Mr. Bill D. Helton, the current Chairman of the Board and CEO
of SPS, will serve as CEO of Newco from the Effective Time until the
later of (i) June 30, 1999 or (ii) 30 months from the Effective Time and
will serve as Chairman of the Board of Newco until May 31, 2001. Mr.
Wayne H. Brunetti, the current President and Chief Operating Officer of
PSC, will serve as Vice Chairman, President and Chief Operating Officer of
Newco until the date when Mr. Helton ceases to be CEO, at which time he
will be entitled to assume the additional role of CEO. Mr. Brunetti will
assume the position of Chairman when Mr. Helton ceases to be Chairman.
The forms of employment agreements for Mr. Helton and Mr. Brunetti are
attached as exhibits to the Merger Agreement.
The Merger Agreement contains certain covenants of the parties pending the
consummation of the Merger. Generally, during the interim period until
consummation, 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 capital stock beyond
certain limits. The Merger Agreement also contains restrictions on,
among other things, charter and by-laws amendments, capital expenditures,
acquisitions, dispositions, incurrence of indebtedness, certain increases
in employee compensation and benefits, and affiliate transactions.
The Merger Agreement may be terminated under certain circumstances,
including (1) by mutual written consent of the Board of Directors of PSC
and SPS; (2) by PSC or SPS if the Merger is not consummated on or before
December 31, 1996 (provided, however, that such termination date shall be
extended to June 30, 1997 if all conditions to closing the Merger, other
than the receipt of statutory approvals by any of the parties, are
capable of being satisfied by December 31, 1996); (3) by PSC or SPS if
approval of either PSC's or SPS's shareholders with respect to the Merger
is not obtained or if any state or federal law, rule or regulation or
court order prohibits the Merger or causes a material adverse effect on
either PSC or SPS; (4) by a non-breaching party if there exist breaches of
any representations or warranties contained in the Merger Agreement which,
individually or in the aggregate, would result in a material adverse
effect on the breaching party and which are not cured within (20) days
after notice; (5) by a non-breaching party if there occur breaches of
specified covenants or material breaches of any other covenant or
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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 or fail to reaffirm its recommendation of the Merger;
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 (based on counsel's opinion), 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 it is terminated pursuant to the
circumstances described in clause (4), (5) or (6) of the previous
paragraph, then, if such breach is not willful, the non-breaching or non-
withdrawing party is entitled to reimbursement of its out-of-pocket
expenses, not to exceed $10 million. In the event of a willful breach or
failure to comply, including under the circumstances described in clause
(6) of the previous paragraph, the non-breaching or non-withdrawing party
will be entitled to its out-of-pocket expenses, (which shall be limited to
$10 million) and an additional fee equal to $35 million. In addition, the
Merger Agreement provides that if such agreement is terminated under the
circumstances described in clause (7) of the previous paragraph, the party
accepting the offer shall pay to the other party an amount equal to its
out-of-pocket expenses, not to exceed $10 million, plus an additional fee
of $35 million, payable prior to entering into an agreement with a third
party. The Merger Agreement also requires payment of a termination fee of
$35 million (and reimbursement of out-of-pocket expenses, not to exceed
$10 million) by one party (the "Payor") to the other in certain
circumstances, if (i) the Merger Agreement is terminated (y) under
circumstances described in clause (2), (3), (4), (5) or (6) 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 Merger to its shareholders; and (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. Such termination fee and out-of-pocket
expenses referred to in the previous sentence shall be paid upon
termination. If the Merger Agreement is terminated as provided in one of
the first three sentences of this paragraph and if any business
combination involving the Payor is accepted within one year of termination
and is consummated within two and one half years from the date of
acceptance of such business combination, the Payor shall pay to the other
party an additional fee of $25 million. All payments made as described in
this paragraph, except reimbursement for out-of-pocket expenses, shall be
payable, to the extent not prohibited by law, in shares of common stock of
the Payor. The termination fees payable by PSC or SPS under these
provisions may not exceed $60 million in the aggregate, excluding
reimbursement of out-of-pocket expenses.
Based on fiscal 1994 results, the Company will have combined annual
revenues of approximately $3 billion and total assets of approximately $6
billion. The companies project a savings of approximately $770 million
in the first 10 years after the transaction is completed. The proposed
allocation of the net savings between ratepayers and shareholders of PSC
and SPS will be submitted to the various regulatory agencies later this
year.
The Company will serve approximately 1.5 million electric customers in
Colorado, Texas, New Mexico, Wyoming, Oklahoma and Kansas and will
provide natural gas service to 933,000 customers in Colorado and Wyoming.
The business of the Company will consist of utility operations and various
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non-utility enterprises, including independent power projects.
PSC recognizes that the divestiture of its existing gas operations is a
possibility under the new registered holding company structure, but will
seek approval from the SEC to maintain this business. If divestiture is
ultimately required, the SEC has historically allowed companies sufficient
time to accomplish divestitures in a manner that protects shareholder
value.
On August 22, 1995, PSC amended (the "Rights Amendment") its Rights
Agreement (the "Rights Agreement") dated as of February 26, 1991 between
PSC and Mellon Bank, N.A., as Rights Agent, to provide that Newco will not
be deemed to be an "Acquiring Person" as defined in the Rights Agreement,
as a result of the execution, delivery and performance of the Merger
Agreement or the consummation of the transactions contemplated therein,
with the effect of exempting Newco and the transactions contemplated by
the Merger Agreement from the Rights Agreement. The foregoing description
of the Rights Amendment is qualified in its entirety by reference to the
terms of the Rights Amendment, a copy which is attached hereto as Exhibit
99 (b).
ITEM 7. Financial Statements and Exhibits
(c) Exhibits. The following exhibits are filed herewith:
2 Agreement and Plan of Reorganization, dated August
22, 1995, by and among Public Service Company of
Colorado, Southwestern Public Service Company and
M-P New Co.
99(a) Press release, dated August 22, 1995, of Public
Service Company of Colorado and Southwestern Public
Service Company.
99(b) Amendment, as of August 22, 1995, to Rights
Agreement dated as of February 26, 1991, between
Public Service Company of Colorado and Mellon Bank,
N.A.
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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, thereunto duly authorized.
PUBLIC SERVICE COMPANY OF COLORADO
/s/ R. C. Kelly
-----------------------------------------
R. C. Kelly
Senior Vice President, Finance,
Treasurer and Chief Financial Officer
Dated: August 22, 1995
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EXHIBIT INDEX
2 Agreement and Plan of Reorganization, dated August 22, 1995, by
and among Public Service Company of Colorado, Southwestern
Public Service Company and M-P New Co.
99(a) Press release, dated August 22, 1995, of Public Service Company
of Colorado and Southwestern Public Service Company.
99(b) Amendment, as of August 22, 1995, to Rights Agreement dated as
of February 26, 1991, between Public Service Company of
Colorado and Mellon Bank, N.A.