EXHIBIT 99.1
For Immediate Release May 21, 1997
Media Contacts: Investor Contacts:
LG&E Energy LG&E Energy
John McCall Charles Markel
(502) 627-3665 (502) 627-2203
Kim Austin Lee
(502) 627-3867
KU Energy KU Energy
David Freibert William English
(606) 367-1271 (606) 367-1120
Greg Shields or Karen Klein
(606) 367-1155
LG&E Energy And KU Energy Sign Definitive Merger Agreement;
To Be One Of The Nation's Largest, Low-Cost Energy Services Companies
Louisville, KY/Lexington, KY -- May 21, 1997 - KU Energy (NYSE:KU) and LG&E
Energy (NYSE:LGE) today announced a definitive agreement to merge. The combined
company will be one of the largest, low-cost energy services holding companies
in the nation. No company in the industry is better positioned to succeed in the
rapidly emerging competitive energy marketplace, according to LG&E Energy and KU
Energy officials. The transaction is valued in excess of $3 billion and the
combined companies will have assets in excess of $4.7 billion.
Under the terms of the agreement, approved unanimously by both boards
yesterday, the holding companies will be merged. The resulting holding company
will be called LG&E Energy and will be based in Louisville. The two utility
companies, Louisville Gas and Electric Company (LG&E), based in Louisville and
Kentucky Utilities Company (KU), based in Lexington, will be wholly-owned
subsidiaries of the holding company. The merged company will serve more than 1.1
million electric and natural gas customers throughout Kentucky, Virginia and
internationally. It will also have access to 11,000 megawatts of low-cost
generation--through ownership of or an interest in 7,400 megawatts and
contractual arrangements for another 4,200 megawatts of power generation.
The agreement provides for KU Energy shareholders to receive 1.67 shares of
LG&E Energy common stock in exchange for each share of KU Energy common stock.
It is expected that the transaction will be accounted for as a pooling of
interests and will qualify as a tax-free exchange. The transaction is expected
to be marginally dilutive to earnings in the first year following the merger and
accretive thereafter. The outstanding debt and preferred stock of KU and LG&E
will not be affected by the merger.
-more-
LG&E Energy And KU Energy Sign Definitive Merger Agreement - Page Two
The companies expect more than $760 million in gross non-fuel savings over
a 10 year period. The savings are anticipated primarily through the integration
of the companies' systems and operations, through joint planning and purchasing,
and by reducing other costs of operations. Over the next five years, the
companies are committing not to seek any base rate increases -- except in
extraordinary circumstances. In fact, the companies estimate that the merger
will translate into reductions in customers' bills of nearly two percent on a
combined basis for each of the next five years.
Following the merger, it is anticipated that the holding company will
continue the dividend level of LG&E Energy. The boards of both companies have
historically and consistently increased dividends.
Roger W. Hale, Chairman and Chief Executive Officer (CEO) of LG&E Energy,
will be Chairman and CEO of the merged company. Michael R. Whitley, Chairman
and CEO of KU Energy, will be Vice-Chairman, President and Chief Operating
Officer (COO) of the merged company. Board representation will be nearly equal
for both companies with KU Energy having seven seats and LG&E Energy having
eight.
"This is a formidable strategic combination of two companies that
individually have unique strengths, which together will be a powerful force as
the industry moves toward customer choice and greater competition," said Hale.
"As one of the nation's largest, low-cost energy services companies with the
largest utility-affiliated energy marketing business, we will define the
successful energy company of the 21st century."
"This merger gives the merged company the critical mass in both generation
and distribution markets to propel our growth over the next few years," Whitley
added. "This transaction will, no doubt, further secure our rank in Kentucky
and Virginia as one of the lowest cost areas for energy supply. We are
convinced that our competitive energy prices will be even more competitive after
our transaction closes. Together, we will provide compelling economic
incentives for our customers and will spur economic development in the region."
The merger is subject to the approval by the shareholders of both companies
and federal and state regulatory agencies. The companies expect that the
transaction will be completed within 12 to 18 months.
-more-
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LG&E Energy And KU Energy Sign Definitive Merger Agreement - Page Three
LG&E Energy Corp., a Fortune 500 company, headquartered in Louisville, KY,
is a diversified energy services and marketing company with businesses in retail
utility services, energy marketing and trading, power generation and project
development. It owns and operates Louisville Gas and Electric Company, a
regulated electric and gas utility in 17 counties around Louisville, KY, and a
gas utility in Mendosa province in Argentina. The company has interests in and
operates power plants in seven states, Argentina and Spain. The company is the
largest utility affiliated energy marketer in the U.S.
KU Energy Corporation, headquartered in Lexington, KY, is a holding company
committed to building shareholder value, having increased its dividends to
shareholders for 16 consecutive years. KU Energy is the parent company of
Kentucky Utilities Company (KU). KU was among the first electric utility
companies in the country to advocate nationwide customer choice and competition
in the energy arena. KU is recognized as an international model for efficient,
low-cost energy production, solid financial management and superior customer
service. The company provides service to more than 461,000 customers in 77
Kentucky counties and five counties in southwestern Virginia.
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Transaction Overview
KU Energy Corporation (NYSE:KU) and LG&E Energy Corp. (NYSE:LGE) Market
Capitalization of the two companies: In excess of $3 billion
Background:
The combined company will be one of the largest, low-cost energy
services holding companies in the nation. No company in the industry is better
positioned to succeed in the rapidly emerging competitive energy marketplace.
The transaction is valued in excess of $3 billion and the combined companies
will have assets in excess of $4.7 billion.
LG&E Energy Corp., a Fortune 500 company, headquartered in Louisville,
KY, is a diversified energy services and marketing company with businesses in
retail utility services, energy marketing and trading, power generation and
project development. It owns and operates Louisville Gas and Electric Company
(LG&E), a regulated electric and gas utility in 17 counties around Louisville,
KY, and a gas utility in Mendosa province in Argentina. The company has
interests in and operates power plants in seven states, Argentina and Spain. The
company is the largest utility affiliated energy marketer in the U.S.
KU Energy Corporation, headquartered in Lexington, KY, is a holding
company committed to building shareholder value, having increased its dividends
to shareholders for 16 consecutive years. KU Energy is the parent company of
Kentucky Utilities Company (KU). KU was among the first electric utility
companies in the country to advocate nationwide customer choice and competition
in the energy arena. KU is recognized as an international model for efficient,
low-cost energy production, solid financial management and superior customer
service. The company provides service to more than 461,000 customers in 77
Kentucky counties and five counties in southwestern Virginia.
Based on 1996 results, the combined company would have had revenues in
excess of $4.3 billion and assets of $4.7 billion.
Terms:
. 1.67 shares of LG&E Energy for each share of KU Energy.
. Combined company to have market capitalization in excess of $3 billion and
assets in excess of $4.7 billion.
. Merger expected to be accounted for as a pooling of interests; expected to
be tax-free reorganization for Federal income tax purposes.
. It is anticipated that following the merger, the holding company will
continue LG&E Energy's dividend payment level. LG&E Energy's current
indicated annual dividend is
$1.15 per common share; KU Energy's is $1.76. The boards of both companies
have historically and consistently increased dividends. Preferred stock and
debt of LG&E and KU to remain outstanding after the transaction.
. Headquarters of holding company to be in Louisville, KY.
. The two utility companies, LG&E, based in Louisville and KU, based in
Lexington, will be wholly-owned subsidiaries of the holding company.
. Roger W. Hale, Chairman and Chief Executive Officer (CEO) of LG&E Energy,
will be Chairman and CEO of the merged company. Michael R. Whitley,
Chairman and CEO of KU Energy, will be Vice-Chairman, President and Chief
Operating Officer (COO) of the merged company. Board representation will be
nearly equal for both companies with KU Energy having seven seats and LG&E
Energy having eight.
. The companies expect more than $760 million in gross non-fuel savings over
a 10 year period. The savings are anticipated primarily through the
integration of the companies' systems and operations, through joint
planning and purchasing, and by reducing other costs of operations. Over
the next five years, the companies are committing not to seek any base rate
increases -- except in extraordinary circumstances. In fact, the companies
estimate that the merger will translate into reductions in customers' bills
of nearly two percent on a combined basis for each of the next five years.
Strategic Benefits:
. Combined company becomes one of nation's largest, low-cost energy services
holding companies
. Nation's largest utility affiliated energy marketer
. Combination of two strong financial performers
. Complementary management teams
. Expanded domestic and international market presence
. Significant operating synergies
. Low cost generation and lowest rates in region
. Combination creates formidable competitor in new energy industry
Approvals & Consents:
. Kentucky Public Service Commission
. Virginia State Corporation Commission
. Federal Energy Regulatory Commission
. Securities and Exchange Commission
. Federal Trade Commission
. Shareholders of both companies
. Anticipated transaction completion: within 12 to 18 months