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EXHIBIT 2(a)
FOR IMMEDIATE RELEASE
December 18, 1997
FOR MORE INFORMATION
Kris Falzone
NIPSCO Industries, Inc.
(219) 647-6203
Carol Churchill
Bay State Gas Company
(508) 836-7370
NIPSCO INDUSTRIES AND BAY STATE GAS COMPANY
AGREE TO COMBINE
MERGER POSITIONS BOTH COMPANIES FOR GROWTH IN NATURAL GAS MARKETS
AND RAPIDLY STRENGTHENS MARKETING ACTIVITIES
MERRILLVILLE, Ind. and WESTBOROUGH, Mass., December 18, 1997-- NIPSCO
Industries, Inc. (NYSE:NI) and Bay State Gas Company (NYSE:BGC) announced today
that they have entered into a definitive merger agreement under which NI will
acquire all of the common stock of Bay State in a stock-for-stock transaction
valued at $40 per share. The $40 per share price represents a premium of 35
percent over the average Bay State share price for the previous 30 trading days.
Bay State shareholders will have the option of taking up to 50 percent of the
total purchase price in cash. The transaction is valued at approximately $780
million ($540 million in equity and $240 million in debt and preferred stock).
The companies also will immediately begin a joint venture under Bay State's
non-regulated EnergyUSA(TM) affiliate that will strengthen the marketing
activities of both organizations.
Bay State Gas Company, one of the largest natural gas utilities in New
England, provides natural gas distribution service to more than 300,000
customers in Massachusetts, New Hampshire and Maine. The combined company will
be one of the 10 largest natural gas distribution systems in the nation, serving
more than 1 million gas customers. The purchase provides NI strategic growth
opportunities in the expanding natural gas market throughout the eastern United
States.
The two companies will soon enter into a joint marketing agreement that
will rapidly expand operations of Bay State's non-regulated full-service energy
services companies. EnergyUSA(TM), and Savage-ALERT, Inc. and EnergyEXPRESS
currently serve more than 90,000 customers in 22 states with the highest
concentration in New England. EnergyUSA(TM) and Savage-ALERT, Inc. have recently
reached agreements with PGW (Philadelphia Gas Works) and Vermont Gas Systems to
jointly market in their respective service territories.
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"The acquisition of Bay State is a unique opportunity for NI to expand
geographically into growing gas markets, diversify our product lines and enhance
our overall marketing capabilities," said Gary L. Neale, Chairman, President and
Chief Executive Officer of NIPSCO Industries. "This opportunity represents a
significant step toward becoming a strong regional player in multiple markets."
This acquisition further links NI to eastern markets. NI and Consolidated
Natural Gas Co. (CNG) recently announced their intent to construct a pipeline
connection to move gas from the Chicago area to eastern markets.
"NIPSCO Industries has been an industry leader in generating gains in total
shareholder returns," said Roger A. Young, Chairman and Chief Executive Officer
of Bay State Gas Company. "By combining Bay State with NI, our shareholders,
employees and customers will benefit from substantial value creation.
Shareholders will receive a significant premium for their shares with the added
upside potential of participating in the ownership of a larger, broader-based
entity; employees will be part of a stronger, growing organization; customers
will have the choice of a greater array of products and services at more
competitive prices than Bay State could provide on a stand-alone basis."
Young continued, "Two years ago, we began working to transform Bay State
into a new kind of energy company designed to compete in the radically different
energy industry of the future. Our focus has been to bring more choices, more
products and services to more and more customers. This strategic merger with the
strengths of NI represents a giant step toward achieving that vision."
"Bay State is a well-managed company whose leadership has achieved a strong
track record in growing shareholder value and capturing opportunities under
deregulation," Neale said. "Both companies share a common vision of growth made
possible through opportunities presented by deregulation, and both have been
leaders in providing customer choice. Bay State's employees and management team
will play a critical role in NI's future."
Customers will benefit significantly from this merger. In addition to the
expansion of product and service options in both the Midwest and Northeast
regions, the merged companies will offer Bay State customers a rate freeze until
2005, following the completion of the two-year rate plan which is currency
pending before the Massachusetts Department of Telecommunications and Energy.
Bay State intends to propose a similar regulatory plan for its customers in
Maine and New Hampshire. It is therefore expected that Bay State's rates for
natural gas will be lower than they would have been had NI and Bay State not
merged.
The merger is expected to result in considerable growth opportunities and
the expansion of the customer base in New England. No layoffs are anticipated as
a result of this merger. NI
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will honor all existing union contracts. Bay State will continue its ongoing
initiatives to reduce costs.
Completion of the transaction is subject to approval by Bay State's common
shareholders as well as the Securities and Exchange Commission, the Federal
Energy Regulatory Commission and state regulatory agencies in Massachusetts, New
Hampshire and Maine. Bay State's preferred shares, all of which are subject to
redemption, will be redeemed by Bay State prior to the shareholder vote on the
merger. The transaction is expected to be completed by late 1998. Under the
terms of the agreement, Bay State will become a wholly-owned subsidiary of
NIPSCO Industries. Bay State will continue to operate under the Bay State names
of Bay State Gas Company and Northern Utilities, Inc. with Bay State management,
employees and directors.
Barr Devlin Associates is serving as financial advisor and provided a
fairness opinion to Bay State.
NI has been a leader in addressing environmental and community needs where
it operates. Through the company's commitment to environmental stewardship, NI
has made significant investments in pollution control and environmental programs
including voluntary early reductions of acid rain and ozone pollutants as well
as greenhouse gases. NI has also been a leader in early adoption of the new
international environmental management standard--ISO 14000.
"These commitments to the environment and community will continue for Bay
State and all companies in the NI family," Neale said.
NIPSCO Industries, with headquarters in Merrillville, Ind., is an
energy/utility-based holding company. Its regulated subsidiaries provide natural
gas and electricity in northern Indiana, water in central Indiana, and
interstate natural gas pipeline services. The company's non-regulated businesses
are primarily energy or utility focused.
Bay State Gas Company, headquartered in Westborough, Mass., operates three
businesses--Utility, Energy Products & Services and Energy Ventures. Bay State's
utility business serves more than 300,000 customers in the states of
Massachusetts, New Hampshire and Maine. The company's non-regulated Energy
Products & Services segment operates through its EnergyUSA(TM), Savage-ALERT,
Inc. and EnergyEXPRESS affiliates. Bay State's Energy Ventures segment develops
businesses and projects that are closely related to the company's core
businesses.
More information about NIPSCO Industries and its subsidiaries is available
via the Internet at www.nipsco.com. More information about Bay State is
available via the Internet at www.bgc.com. More information about EnergyUSA(TM)
is available via the Internet at www.energyusa.com.
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