For Immediate Release Exhibit 99.1
February 17, 1999
SCANA Corporation Announces Acquisition of Public Service Company of
North Carolina, Inc.
Columbia, SC, and Gastonia, NC, February 17, 1999 -- SCANA Corporation (NYSE:
SCG) and Public Service Company of North Carolina, Inc. (NYSE: PGS) announced
today that they have entered into a definitive agreement whereby SCANA will
acquire PSNC in a transaction valued at approximately $900 million, including
the assumption of debt. The transaction is expected to be accounted for as a
purchase and is anticipated to be accretive to SCANA's earnings per share in
2001.
The combination of SCANA and PSNC unites two premier energy companies in South
Carolina and North Carolina and will create a company with a total market
capitalization, including debt and preferred stock, of approximately $6 billion,
serving approximately 517,000 electric customers in South Carolina and more than
750,000 natural gas customers in South Carolina, North Carolina and Georgia.
SCANA also has a significant investment in telecommunications companies that
have more than 350,000 customers throughout the Southeast. Based on 1998 results
for the two companies, total annual revenues for the combined company would be
approximately $2 billion.
Terms of the Transaction
Under the terms of the agreement, shareholders of PSNC will receive
consideration valued at $33.00 per share. This represents an approximate 45
percent premium to PSNC's closing price on February 16, 1999. Each PSNC
shareholder may elect to receive 100 percent of the consideration in SCANA
common stock, 100 percent in cash, or a combination thereof, subject to the
total cash allocated to PSNC shareholders being no higher than 50 percent of the
total consideration received by PSNC shareholders. PSNC shareholders who elect
to receive stock will receive between 1.02 and 1.45 shares of SCANA common stock
per share of PSNC stock depending upon the average price over a 20-day trading
period of SCANA common stock prior to closing. This equates to a collar of
between $22.75 and $32.40 for SCANA shares. Based on SCANA's closing price on
February 16, 1999 of $26.81, the PSNC shareholders would receive 1.23 SCANA
shares for each PSNC share.
As part of the agreement, SCANA shareholders will have the right to exchange
their current shares of SCANA common stock for new shares of SCANA common stock,
or $30 per share in cash, such cash representing approximately a 10 percent
premium over SCANA's five-day average trading price through February 16, 1999.
SCANA will allocate $700 million in cash for payment to PSNC and SCANA
shareholders under the election process. Dependent on the amount of cash elected
by the PSNC shareholders, a minimum of approximately $350 million and a maximum
of $700 million will be allocated to SCANA shareholders who elect cash. In the
event that shareholders of SCANA fail to elect to receive all of the cash
allocated to them, cash will be allocated among the SCANA shareholders who have
elected to receive SCANA common stock; in the event that shareholders of SCANA
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fail to elect to receive all of the shares of SCANA common stock allocated to
them, the shares will be proportionately allocated among those shareholders who
have elected to receive cash, other than among odd lot holders who may receive
cash in any event.
The transaction is expected to be tax-free to SCANA and PSNC shareholders to the
extent they receive SCANA common stock and any cash received is expected to be
taxed as capital gains.
Management Comments
"This acquisition is about growth, opportunity and maximizing shareholder value
in the face of the dramatic changes taking place in today's utility industry,"
said William B. Timmerman, chairman, president and chief executive officer of
SCANA. "PSNC's management team has built one of the most competitive gas
distribution companies in the nation. Their expertise will be a valuable
addition to our own natural gas operations. This combination offers us the
opportunity to extend our natural gas service area into some of the fastest
growing markets in North Carolina while nearly doubling our natural gas customer
base. Both our companies share a common mission, vision and values that are
focused on competitive prices, high quality reliable customer service and
increasing shareholder value. I am excited about the prospects that this
acquisition holds for our combined customers, shareholders and employees."
Charles E. Zeigler, Jr., chairman, president and chief executive officer of
PSNC, said, "PSNC and its employees have worked diligently to position the
Company to be an active participant in the future's dynamic energy markets under
our Plan 2001. The advanced operational goals we set for ourselves last year
under our plan are well served by partnering our highly competitive natural gas
distribution franchise in North Carolina with SCANA's diversified electric,
natural gas, and telecommunications businesses throughout the Southeast. Through
this combination, we obtain the critical mass that facilitates significant
growth opportunities for the benefit of all our vital constituencies. Today, we
have taken our boldest step yet to position ourselves in the highly competitive
energy industry of the next century."
It is anticipated that PSNC will be operated as a wholly-owned subsidiary of
SCANA. Following the close of the transaction, Zeigler will become a director of
SCANA, a member of a three-person Office of the Chairman at SCANA Corporation,
and president and chief operating officer of the PSNC subsidiary, with
responsibility for all North Carolina operations. In addition to Zeigler, two
additional PSNC current outside directors will be named to the SCANA board
following the close of the transaction.
A transition plan is currently being developed to guide the integration of PSNC
employees, facilities and customer services into SCANA. The change is not
expected to have an immediate effect on the way customers do business with
either company. The integration is expected to provide opportunities for margin
improvement and cost savings through consolidation of duplicate functions and
greater efficiencies in operations, business processes and purchasing. All union
contracts will be honored.
Traditionally, SCANA has aggressively expanded its natural gas service in South
Carolina and recently has moved into the Georgia natural gas market. This
combination will support PSNC's strong commitment to extending its natural gas
services in North Carolina.
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Completion of the transaction is conditioned, among other things, upon the
approvals of the South Carolina Public Service Commission, the North Carolina
Utilities Commission, the Securities and Exchange Commission, and the approval
of both companies' common shareholders. It is anticipated that the approval
process can be completed by the end of 1999.
PaineWebber Incorporated acted as financial advisor and provided a fairness
opinion to SCANA. Morgan Stanley Dean Witter acted as financial advisor and
provided a fairness opinion to PSNC.
Common Dividend Policy
In conjunction with this transaction, SCANA announced today that its board of
directors has decided to adopt a common stock dividend policy to bring the
Company'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 the Company'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 decision to change our common stock dividend policy was not an easy one,
but it was a decision our board considered appropriate to give us the
flexibility to deal with the demands of a more competitive utility industry
while implementing our growth strategies," said Timmerman. "As competition in
our industry intensifies, we need to retain more of our earnings internally to
position the Company for growth. The resulting increase in retained cash flow
strengthens our financial position and broadens our ability to make additional
investments in our core energy businesses as well as in new business
opportunities. We believe this strength-through-growth strategy will increase
future earnings, providing a sound basis for future growth in our dividends and
stock price."
SCANA's board of directors also declared the regular quarterly dividends on all
outstanding series of cumulative preferred stock of South Carolina Electric &
Gas Company (SCE&G), its principal subsidiary, for the first quarter of 1999.
These dividends are also payable April 1, 1999 to holders of record at the close
of business on March 10, 1999. Dividends paid on SCE&G's issues of cumulative
preferred stock are not affected by the change in the Company's common stock
dividend policy.
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Capital Structure
To fund the cash portion of the consideration to be paid to SCANA and PSNC
shareholders, SCANA intends to borrow approximately $700 million. This would
result in an initial consolidated debt to total capitalization ratio for SCANA
of approximately 58 percent. Pro forma for the proposed transaction, 1998 cash
flow after the payment of common dividends would have increased by approximately
$40 million in comparison to the combined stand-alone entities after taking into
account the additional interest expense on the new indebtedness. It is
anticipated that neither of the utilities' credit ratings will be adversely
affected as a result of this transaction. It is also expected that the holding
company, SCANA, would continue to carry investment grade ratings.
The Companies
Headquartered in Columbia, SC, SCANA is a $5.3 billion (assets) energy-based
holding company whose businesses include regulated electric and natural gas
utility operations, telecommunications and other energy-related businesses.
SCANA's subsidiaries serve approximately 517,000 electric customers in South
Carolina and more than 420,000 natural gas customers in South Carolina and
Georgia. SCANA also has a significant investment in telecommunications companies
that have more than 350,000 customers throughout the Southeast. SCANA had
operating revenues of approximately $1.6 billion for the twelve months ended
December 31, 1998. SCANA has about 4,700 employees. Information about SCANA and
its businesses is available on the Internet at www.scana.com.
PSNC is a $656 million (assets) energy company headquartered in Gastonia, NC.
PSNC is franchised to serve a 31-county area in North Carolina and distributes
natural gas to approximately 340,000 customers in 95 cities and communities
ranging from the Raleigh, Durham and Chapel Hill areas in the north central part
of the state; the Concord, Statesville, Gastonia and Forest City areas in the
Piedmont; to the Asheville, Hendersonville and Brevard areas in the western part
of North Carolina. PSNC, through various subsidiaries and a joint venture, also
participates in nonregulated businesses such as natural gas brokering and supply
services, and the conversion and fueling of natural gas vehicles. PSNC's
operating revenues totaled approximately $300 million for the twelve months
ended December 31, 1998. The company has about 1,000 employees. Information
about PSNC is available on the Internet at www.psnc.com.
This press release includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
reflect numerous assumptions, and involve a number of risks and uncertainties.
Although both companies believe that their assumptions are reasonable, they can
give no assurance that their goals will be achieved. The factors that could
cause actual results to differ materially from those indicated by such
forward-looking statements include, but are not limited to, the following: that
the information is of a preliminary nature and may be subject to further and/or
continuing review and adjustment; regulatory issues, including the pace of
deregulation of retail natural gas and electricity markets in the United States;
changes in the economy; the impact of competition from other energy suppliers;
the management of the companies' operations; variations in prices of natural gas
and fuels used for electric generation; growth opportunities for the companies'
regulated and nonregulated businesses; conditions of the capital and equity
markets; changes in the companies' accounting policies; abnormal weather
conditions; performance of the telecommunications companies in which SCANA
Corporation has made significant investments; inflation; exposure to
environmental issues and liabilities; changes in environmental regulations; and
the other risks and uncertainties described from time to time in the companies'
periodic reports filed with the Securities and Exchange Commission. The
companies disclaim any obligation to update any forward-looking statements.
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Contacts for SCANA Contacts for PSNC
Media: Media:
Roger Schrum Kim Bastian
rschrum@scana.com bastkim@psnc.com
(803) 217-7777 (704) 834-6333
Investors: Investors:
John Winn Jack Mason
jwinn@scana.com masojack@psnc.com
(803) 217-9240 (704) 834-6422
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