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): October 15, 1996
(October 12, 1996)
PACIFIC ENTERPRISES
(Exact Name of Registrant as Specified in its Charter)
California 1-40 95-0743670
(State of (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
555 West Fifth Street
Suite 2900
Los Angeles, California 90013-1011
(Address of Principal Executive Offices) (Zip Code)
(213) 895-5000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, If Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On October 14, 1996, Pacific Enterprises (the
parent company of Southern California Gas Company) and
Enova Corporation ("Enova," the parent company of San
Diego Gas & Electric) announced that their Boards of
Directors had unanimously approved a business combination
of the two companies pursuant to a strategic merger of
equals in a tax-free transaction to be accounted for as a
pooling of interests. As a result of the transaction,
Pacific Enterprises and Enova will become subsidiaries of
a new holding company and their common shareholders will
become shareholders of the new holding company. Pacific
Enterprises common shareholders will receive 1.5038
shares of new holding company common stock for each of
their shares of Pacific Enterprises common stock and
Enova common shareholders will receive one share of new
holding company common stock for each of their shares of
Enova common stock. Preferred stock of Pacific
Enterprises, Southern California Gas Company and San
Diego Gas & Electric will remain outstanding. The new
holding company will be incorporated in California and
will be exempt from the Public Utility Holding Company
Act as an intrastate holding company.
To effect the combination, Pacific Enterprises,
Enova, Mineral Energy Company, a newly-formed California
corporation (the "New Holding Company") 50% of whose
outstanding capital stock is owned by Pacific Enterprises
and 50% of whose capital stock is owned by Enova, B
Mineral Energy Sub, a California corporation ("Pacific
Sub") and a wholly owned subsidiary of the New Holding
Company, and G Mineral Energy Sub, a California
corporation ("Enova Sub") and a wholly owned subsidiary
of the New Holding Company, have entered into an
Agreement and Plan of Merger and Reorganization dated as
of October 12, 1996 (the "Merger Agreement"). The Merger
Agreement and the press release issued in connection
therewith are filed herewith as Exhibits 10.1 and 99.1,
respectively, and are incorporated herein by reference.
The description of the Merger Agreement set forth below
does not purport to be complete and is qualified in its
entirety by the provisions of the Merger Agreement.
Pursuant to the Merger Agreement, Pacific Sub
will be merged with and into Pacific Enterprises, with
Pacific Enterprises remaining as the surviving
corporation and becoming a subsidiary of the New Holding
Company, and Enova Sub will be merged with and into
Enova, with Enova remaining as the surviving corporation
and also becoming a subsidiary of the New Holding Company
(collectively, the "Mergers"). The Mergers, which were
unanimously approved by the respective Boards of
Directors of each of the constituent companies, are
expected to occur shortly after all the conditions to the
consummation of the Mergers, including obtaining
applicable regulatory approvals, are met or waived. The
Mergers are expected to close by the end of 1997. The
Mergers are expected to be tax-free to Pacific
Enterprises and Enova and their respective shareholders
(except as to dissenting shares and fractional shares).
The Mergers are subject to certain customary
closing conditions, including, without limitation, the
receipt of the required shareholder approvals of Pacific
Enterprises and Enova; and the receipt of all necessary
governmental approvals and the making of all necessary
governmental filings, including approvals of state
utility regulators in California, the approval of, or
disclaimer of jurisdiction by, the Federal Energy
Regulatory Commission, the approval of the Securities and
Exchange Commission under the Public Utility Holding
Company Act, the approval of the Nuclear Regulatory
Commission and the filing of the requisite notification
with the Federal Trade Commission and the Department of
Justice under the Hart-Scott-Rodino Antitrust Act of
1976, as amended, and the expiration of the applicable
waiting period thereunder. In addition, the Mergers are
conditioned upon the effectiveness of a registration
statement to be filed by the New Holding Company with
respect to the New Holding Company common stock to be
issued in the Mergers. (See Article VII of the Merger
Agreement.) Shareholder meetings to vote on the Mergers
will be convened as soon as practicable and are expected
to be held in early 1997. Shareholder approval requires
the affirmative vote of (i) a majority of (x) the
outstanding shares of common stock of Pacific Enterprises
and (y) the outstanding shares of common stock and
preferred stock of Pacific Enterprises voting together as
a class, and (ii) a majority of the outstanding shares of
common stock of Enova.
The Merger Agreement contains certain covenants
of the parties pending the consummation of the Mergers.
Generally, Pacific Enterprises and Enova must carry on
their businesses in the ordinary course consistent with
past practice and may not in any year increase dividends
on common stock beyond 110% of the prior year, may not
issue capital stock beyond certain limits and may not
repurchase common stock in excess of the lesser of (i)
4,250,000 shares for each company and (ii) the number of
shares permitted by pooling accounting limitations. The
Merger Agreement also contains certain restrictions and
limitations on, among other things, charter and by-law
amendments, acquisitions, capital expenditures,
dispositions, incurrence of indebtedness, certain
increases in employee compensation and benefits and
affiliate transactions. (See Article V of the Merger
Agreement.)
The Merger Agreement provides that, after the
effectiveness of the Mergers (the "Effective Time"), the
corporate headquarters and principal executive offices of
the New Holding Company will be in San Diego, California.
Those of Southern California Gas Company will continue to
be in Los Angeles, California and those of San Diego Gas
& Electric will continue to be in San Diego, California.
At the Effective Time, the Board of Directors
of the New Holding Company will constitute an equal
number of directors designated by Pacific Enterprises and
Enova. Pursuant to Employment Agreements entered into
with the New Holding Company which become effective at
the Effective Time, Richard D. Farman, the current
President and Chief Operating Officer of Pacific
Enterprises, will serve as the Chairman of the Board and
Chief Executive Officer of the New Holding Company until
the earlier of September 1, 2000 or the second
anniversary of the Effective Time, and Stephen L. Baum,
the current President and Chief Executive Officer of
Enova, will serve as the Vice-Chairman, President and
Chief Operating Officer of the New Holding Company during
such time and will become the New Holding Company's Chief
Executive Officer two years after the Effective Time and
will add the title of Chairman by September 2000 when Mr.
Farman retires. In addition, pursuant to Employment
Agreements entered into with the New Holding Company
which become effective at the Effective Time, Warren I.
Mitchell, the current President of Southern California
Gas Company, will become the President and the principal
executive officer of the New Holding Company's regulated
operations, and Donald E. Felsinger, the current
President and Chief Executive Officer of San Diego Gas &
Electric, will become President and principal executive
officer of the New Holding Company's unregulated
businesses.
The Employment Agreements entered into between
the New Holding Company and each of Messrs. Farman, Baum,
Mitchell and Felsinger are filed herewith as Exhibits
10.2, 10.3, 10.4 and 10.5, respectively, and are
incorporated herein by reference. The description of
such Employment Agreements set forth above does not
purport to be complete and is qualified in its entirety
by the provisions of the Employment Agreements.
The Merger Agreement may be terminated under
certain circumstances, including by mutual consent of
Pacific Enterprises and Enova; by either company if the
Mergers are not consummated by April 30, 1998; by either
company if the requisite shareholder approvals are not
obtained by June 30, 1997; by either company as a result
of a legal or regulatory prohibition; by a non-breaching
company if there occurs a material breach of any material
representation, warranty, covenant or agreement contained
in the Merger Agreement which is not cured within sixty
(60) days; by either company if there is withdrawal or
adverse modification of the recommendation of the Merger
Agreement by the other company's Board of Directors or
the approval of a third party acquisition proposal by the
other company's Board of Directors; or by either company,
under certain circumstances, as a result of a third party
acquisition proposal which such company, pursuant to its
directors' fiduciary duties, determines to accept.
If the Merger Agreement is terminated as a
result of: (i) the failure of the shareholders of either
Pacific Enterprises or Enova to provide the requisite
approval of the Merger Agreement on or before June 30,
1997 at a time following the initiation of a publicly
announced third party acquisition proposal involving the
company whose shareholders fail to grant the necessary
approval; (ii) the withdrawal or adverse modification of
the recommendation of the Merger Agreement by the other
company's Board of Directors or the approval of a third
party acquisition proposal by the other company's Board
of Directors; or (iii) the occurrence of a third party
acquisition proposal which the Board of Directors of the
company receiving the proposal determines in good faith,
after consultation with outside counsel and after giving
effect to all concessions which may be offered by the
other company in the terms and conditions of the Merger
Agreement, is reasonably necessary to accept in order for
such Board to act in a manner consistent with its
fiduciary duties under applicable law, then (x) the
company whose shareholders fail to grant the necessary
approval, in the case of clause (i) above, (y) the non-
terminating company, in the case of clause (ii) above, or
(z) the company which has received the third party
acquisition proposal, in the case of clause (iii) (as the
case may be, the "Target Company"), will be required to
pay to the other company (the "Recipient") a termination
fee of $72 million plus an amount in relation to the
Recipient's expenses calculated as described below
(collectively, the "Termination Amount") if, within one
year following such termination, the Target Company or
any of its material subsidiaries consummates, or accepts
a written offer to consummate, an acquisition proposal
with any third party.
If the Termination Amount becomes payable
within the first four months following the execution of
the Merger Agreement, the expense reimbursement portion
of the Termination Amount will equal $3 million plus an
amount equal to the Recipient's documented out-of-pocket
expenses in excess of $3 million, subject to a maximum
aggregate expense reimbursement of $5 million. If the
Termination Amount becomes payable after the first four
months following the execution of the Merger Agreement,
the expense reimbursement portion of the Termination
Amount will equal $3 million plus an amount equal to the
Recipient's documented out-of-pocket expenses in excess
of $3 million, subject to a maximum aggregate expense
reimbursement of $10 million. The Merger Agreement also
provides for the payment by the non-terminating company
of an expense reimbursement amount calculated as
described above upon a termination of the Merger
Agreement by reason of a material breach by the other
company. (See Article VIII of the Merger Agreement.)
In connection with the execution and delivery
of the Merger Agreement, Pacific Enterprises and Enova
have agreed to use their best efforts to negotiate the
terms of, and enter into a joint venture agreement (the
"Joint Venture Agreement") regarding the formation of a
joint venture to pursue natural gas and electricity
marketing opportunities and provide energy management and
related energy services. Pursuant to the terms of the
Joint Venture Agreement, the joint venture and the Joint
Venture Agreement are terminable by either company
without economic penalty upon a termination of the Merger
Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
10.1 Agreement and Plan of Merger and
Reorganization, dated as of October
12, 1996, by and among Pacific
Enterprises, Enova, the New Holding
Company, Pacific Sub and Enova Sub.
10.2 Employment Agreement dated as of October 12,
1996 between the New Holding Company and Richard D.
Farman.
10.3 Employment Agreement dated as of October 12,
1996 between the New Holding Company and Stephen L.
Baum.
10.4 Employment Agreement dated as of October 12, 1996
between the New Holding Company and Warren I. Mitchell.
10.5 Employment Agreement dated as of October 12, 1996
between the New Holding Company and Donald E.
Felsinger.
99.1 Press release, dated October 14, 1996, of Pacific
Enterprises and Enova.
SIGNATURE
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.
PACIFIC ENTERPRISES
Date: October 15, 1996 By: /s/ RALPH TODARO
Name: Ralph Todaro
Title: Vice President and
Controller
EXHIBIT INDEX
Number Description
Page
10.1 Agreement and Plan of Merger and
Reorganization, dated as of October
12, 1996, by and among Pacific
Enterprises, Enova, the New Holding
Company, Pacific Sub and Enova Sub.
10.2 Employment Agreement dated as of October 12, 1996
between the New Holding Company and Richard D.
Farman.
10.3 Employment Agreement dated as of October 12, 1996
between the New Holding Company and Stephen L.
Baum.
10.4 Employment Agreement dated as of October 12, 1996
between the New Holding Company and Warren I.
Mitchell.
10.5 Employment Agreement dated as of October 12, 1996
between the New Holding Company and Donald E.
Felsinger.
99.1 Press release, dated October 14,
1996, of Pacific Enterprises and
Enova.