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
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SOUTHWESTERN PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
1-3789
(Commission file number)
New Mexico 75-0575400
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
Tyler at Sixth, Amarillo, Texas 79101
(Address of principal executive offices) (Zip code)
(806) 378-2121
(Registrant's telephone number, including area code)
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
Southwestern Public Service Company, a New Mexico corporation
("SPS"), Public Service Company of Colorado, a Colorado corporation ("PSC"), and
M-P New Co., a newly-formed Delaware corporation ("Newco"), have entered into an
Agreement and Plan of Reorganization, dated as of August 22, 1995 (the "Merger
Agreement"), which provides for a business combination as peer firms involving
SPS and PSC 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 close 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 as Exhibits 2 and 99 to this report and are incorporated
herein by reference. 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 (the "1935 Act"). Newco, which will serve as the holding
company, will be renamed at a later date and will be the parent company of
both SPS and PSC.
Under the terms of the Merger Agreement, New SPS will be merged with
and into SPS and New PSC will be merged with and into PSC. SPS and PSC shall be
the surviving corporations and shall continue their corporate existence under
the laws of the State of New Mexico and the State of Colorado, respectively.
Each outstanding share of Common Stock, par value $1.00 per share, of SPS will
be cancelled and converted into the right to receive 0.95 shares of Common
Stock, par value $1.00 per share, of Newco ("Newco Common Stock") and each
outstanding share of Common Stock, par value $5.00 per share, of PSC will
be cancelled and converted into the right to receive 1.0 shares of Newco Common
Stock. As of August 4, 1995, SPS had 40.9 million common shares outstanding
and PSC had 63.1 million common shares outstanding. Based on such
capitalization, the Merger would result in the common shareholders of SPS
receiving 38.1% of the common equity of Newco and the common shareholders of
PSC owning 61.9% 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 SPS and PSC.
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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 annual dividend rate is currently $2.04 per share. Based on
the exchange ratio, the pro forma dividend for Newco would be $2.32 per share
on an annual basis, following completion of the Merger. Newco's common stock
dividend level will be dependent upon Newco'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 SPS and
PSC; and the receipt of all necessary governmental approvals and the making of
all necessary governmental filings, including approvals or findings of state
utility regulators in Texas, Colorado, New Mexico, Wyoming, Oklahoma and Kansas,
the approval of the Federal Energy Regulatory Commission, the Securities and
Exchange Commission (the "SEC") under the 1935 Act and the Nuclear Regulatory
Commission, and the filing of the requisite notification with the Federal
Trade Commission and the Department of Justice under the Hart-ScottRodino
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 Merger 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 by Newco with the SEC
with respect to shares of Newco Common Stock to be issued in the Merger 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
Merger (the "Effective Time"), the corporate offices of Newco will be located in
Denver, Colorado, and significant operating offices will be located in Amarillo,
Texas. SPS and PSC will maintain their company headquarters in Amarillo and
Denver, 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
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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 agreement 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, 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 bylaw 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 consent of the parties; (2) by PSC or SPS if the Merger
is not consummated by 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 the
approval of either SPS's or PSC'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 SPS or PSC;
(4) by a non-breaching party if there exist breaches of any representations or
warranties contained in the Merger Agreement as of the date thereof, which,
individually or in the aggregate, would result in a material adverse effect on
the breaching party and which are not cured within twenty (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 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
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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 other 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
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extent not prohibited by law, in shares of common stock of the Payor. The
termination fees payable by SPS or PSC under these provisions may not exceed $60
million in the aggregate, excluding reimbursement of out-of-pocket expenses.
Based on fiscal 1994 results, Newco 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 Merger is completed. The proposed allocation of the net
savings between ratepayers and shareholders of SPS and PSC will be submitted to
the various regulatory agencies later this year.
Newco 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 Newco will consist of utility operations and various non-utility enterprises,
including independent power projects.
SPS recognizes that the divestiture of PSC's existing gas operations
is a possibility under the new registered holding company structure, but the
companies 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.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS. The following exhibits are filed herewith:
2 Agreement and Plan of Reorganization, dated as of August 22,
1995, by and among Public Service Company of Colorado,
Southwestern Public Service Company and M-P New Co.
99 Press Release, dated August 22, 1995, of South-
western Public Service Company and Public Ser-
vice Company of Colorado.
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SIGNATURES
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.
SOUTHWESTERN PUBLIC SERVICE COMPANY
(Registrant)
/s/ Doyle R. Bunch II
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Name: Doyle R. Bunch II
Title: Executive Vice President, Accounting
and Corporate Development
DATE: August 22, 1995
EXHIBIT INDEX
Exhibit
Number
2 Agreement and Plan of Reorganization, dated as of August 22,
1995, by and among Public Service Company of Colorado,
Southwestern Public Service Company and M-P New Co.
99 Press Release, dated August 22, 1995, of Southwestern Public
Service Company and Public Service Company of Colorado.