Filed by: NiSource Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Columbia Energy Group
Commission File No: 001-01098
On February 28, 2000, NiSource Inc. and Columbia Energy Group
announced their proposed merger. The following is a transcript of the
joint press release issued on February 28, 2000:
PRESS RELEASE
FEBRUARY 28, 2000
[NiSource Logo] [Columbia Energy Group Logo]
NISOURCE AND COLUMBIA ENERGY GROUP AGREE TO COMBINATION
Creates Leading Gas Competitor Within Key Energy Corridor
Merrillville, IN and Herndon, VA (February 28, 2000) NiSource Inc.
(NYSE:NI) and Columbia Energy Group (NYSE:CG) today announced that the
boards of directors of both companies have approved a definitive
merger agreement under which NiSource will acquire all of the
outstanding shares of Columbia in a transaction which values
Columbia's common equity at approximately $6.0 billion. NiSource will
also assume approximately $2.5 billion in Columbia long-term debt.
Based upon the closing market price for NiSource on February 25, 2000,
the combined company would have an enterprise value of approximately
$13.7 billion.
Upon completion of the transaction, Columbia Energy Group and NiSource
will become wholly owned subsidiaries of a new holding company. The
transaction will be accounted for as a purchase and is expected to be
dilutive to NiSource's earnings per share in the first year after the
close of the combination primarily due to transaction costs and other
one-time charges and accretive thereafter.
With assets stretching from the Gulf of Mexico, through the Midwest to
the Northeast, the combined company will have a powerful platform,
with access to 30% of the U.S. population and 40% of U.S. energy
consumption. The company will have over 4.1 million gas, electric,
water and propane customers located primarily in nine states. It
will:
* Be the largest gas company east of the Rockies, based on
customers
* Have the nation's second largest volume of gas sales with 911
million cubic feet per day
* Have the most gas storage with 700 billion cubic feet of capacity
TERMS:
Under the agreement, Columbia Energy Group shareholders will receive,
for each Columbia Energy Group share of common stock, $70 in cash plus
a $2.60 face value SAILS{SM} (a unit consisting of a zero coupon debt
security with a forward equity contract). Columbia shareholders also
have the option to elect to receive (in lieu of cash and SAILS{SM})
new holding company stock in a tax-free exchange, for up to 30% of the
outstanding Columbia Energy Group shares. Under the common stock
option, each Columbia Energy share will be exchanged for $74 in new
holding company stock subject to a collar such that, if the average
NiSource share price during the 30 days prior to the closing of the
transaction is greater than $16.50, Columbia shareholders will receive
shares of new holding company stock valued at $74 for each Columbia
Energy Group share; if the average NiSource share price during the 30
days prior to closing of the transaction is $16.50 or below, Columbia
shareholders will receive 4.4848 shares of new holding company stock
for each Columbia Energy Group share.
Gary L. Neale, chairman, president and chief executive officer of
NiSource, said, "This combination creates the leading gas competitor
within the key energy corridor between the Gulf Coast and the
Northeast. It will be a super-regional energy company with
complementary market areas and no asset overlap. Scale and geography
are critical to success in the evolving competitive energy industry,
and we will have the size and scope necessary to compete and win. Our
strategic location and breadth of assets will give us the ability to
arbitrage BTUs across time, weather, geography and supply. Consumer
choice, efficiency, and new products and services such as distributed
generation make this transaction extremely compelling for our
shareholders, customers, employees and the communities we serve.
"The transaction structure is designed to provide Columbia Energy
Group shareholders with the certainty of a cash offer, while also
recognizing the opportunity to share, on a tax-free basis, in the
significant future value created by this super-regional combination.
Shareholders in the combined company can expect significant growth in
earnings per share on a going forward basis," continued Mr. Neale.
"Our success in building our business has been predicated upon fully
utilizing the skills and experience of the management team and
employees present within the companies with which we have merged. We
are encouraged by the similarities in our corporate cultures and
expect a smooth integration of our two companies. We have been
impressed with the quality of Columbia's management team. We
anticipate retaining key management personnel from each of the
critical operating units and maintaining the headquarters for those
businesses in their current locations," Mr. Neale concluded.
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Page 2
Oliver G. Richard III, chairman, president and chief executive officer
of Columbia Energy Group, said, "Our Board of Directors and senior
management fully support this transaction, which we have determined is
in the best interest of Columbia and its shareholders. The Board
reached this conclusion after a comprehensive evaluation of strategic
alternatives to generate value greater than that which Columbia's
business plan could create. We believe this merger with NiSource not
only meets our objective of delivering superior value to Columbia's
shareholders, but provides an opportunity for our shareholders and
employees to participate in the growth of the combined entity. We are
firmly committed to helping to achieve a rapid and seamless
integration of our two companies."
CONDITIONS:
The merger is conditioned upon, among other things, the approvals of
the shareholders of both companies and various regulatory commissions.
However, if the NiSource shareholder approval is not obtained, the
transaction will automatically be restructured so that Columbia Energy
Group shareholders will receive $70 in cash plus a $3.02 face value
SAILS{SM} unit of NiSource with no option for Columbia shareholders to
elect new holding company stock. The transaction is not subject to
financing. NiSource has obtained a commitment from Credit Suisse
First Boston and Barclays Bank Plc for a bank facility in an amount
sufficient to finance the cash portion of the purchase price. It
should be noted that the Federal Trade Commission raised no objection
to a previously proposed NiSource transaction with Columbia Energy
Group. NiSource intends to register as a holding company with the
Securities and Exchange Commission under the Public Utility Holding
Company Act. NiSource and Columbia anticipate that the transaction
can be completed by the end of 2000.
Credit Suisse First Boston and Wasserstein Perella & Company, Inc.
acted as financial advisors, and Schiff Hardin & Waite, Simpson
Thacher & Bartlett and Dewey Ballantine acted as legal counsel to
NiSource. Morgan Stanley Dean Witter and Salomon Smith Barney acted
as financial advisors, and Sullivan & Cromwell acted as legal counsel
to Columbia Energy Group.
Columbia Energy Group, based in Herndon, Va., is one of the nation's
leading energy services companies, with assets of approximately $7
billion. Its operating companies engage in virtually all phases of the
natural gas business, including exploration and production,
transmission, storage and distribution, as well as retail energy
marketing, propane and petroleum product sales, and electric power
generation. Information about Columbia Energy Group (NYSE: CG - news)
is available on the Internet at www.columbiaenergygroup.com.
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Page 3
NiSource Inc. is a holding company whose primary business is the
distribution of electricity, natural gas and water in the Midwest and
Northeast United States. The company also markets utility services and
customer-focused resource solutions along a corridor stretching from
Texas to Maine. Further information about the company may be found on
the Internet at http://www.nisource.com.
This press release contains certain forward-looking statements
within the meaning of the federal securities laws; these forward-
looking statements are subject to various risks and
uncertainties. The factors that could cause actual results to
differ materially from the projections, forecasts, estimates and
expectations discussed herein may include factors that are beyond
the companies' ability to control or estimate precisely, such as
estimates of future market conditions, the behavior of other
market participants and the actions of the Federal and State
regulators. Other factors include, but are not limited to,
actions in the financial markets, weather conditions, economic
conditions in the two companies' service territories,
fluctuations in energy-related commodity prices, conversion
activity, other marketing efforts and other uncertainties. Other
risk factors are detailed from time to time in the two companies'
SEC reports. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. The companies do not undertake any
obligation to publicly release any revisions to these forward-
looking statements to reflect events or circumstances after the
date of this press release.
NiSource and the new holding company will be filing a
registration statement, which will contain a joint proxy
statement/prospectus of NiSource and Columbia Energy, and other
documents with the Securities and Exchange Commission. Investors
and security holders are urged to read the joint proxy
statement/prospectus and any other relevant documents filed with
the SEC when they become available because they will contain
important information. Investors and security holders will be
able to receive the joint proxy statement/prospectus and other
documents free of charge at the SEC's web site, www.sec.gov, from
NiSource Investor Relations at 801 East 86th Avenue,
Merrillville, Indiana 46410 or from Columbia Investor Relations
at 13880 Dulles Corner Lane, Herndon, Virginia 20171.
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Page 4
NOTE TO EDITORS: TODAY'S NEWS RELEASE, ALONG WITH OTHER NEWS ABOUT
NISOURCE AND COLUMBIA ENERGY GROUP IS AVAILABLE ON THE INTERNET AT
www.nisource.com AND www.columbiaenergygroup.com.
CONTACTS FOR NISOURCE: CONTACTS FOR COLUMBIA:
MEDIA: MEDIA:
Maria Hibbs R.A. Rankin, Jr.
(219) 647-6201 (703) 561-6044
INVESTORS: Michael Freitag
Dennis Senchak / Rae Kozlowski Kekst & Co.
(219) 647-6085/(219) 647-6083 (212) 521-4896
Barrett Godsey / Joele Frank INVESTORS:
Joele Frank, Wilkinson Brimmer Katcher Thomas Hughes
(212) 355-4449 (703) 561-6001
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