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
February 16, 1999
Date of Report (Date of Earliest Event Reported)
Public Service Company of North Carolina, Incorporated
(Exact Name of Registrant as Specified in Charter)
North Carolina 1-11429 56-0233140
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
400 Cox Road, P.O. Box 1398
Gastonia, NC 28053-1398
(Address of Principal Executive Offices and Zip Code)
(704) 864-6731
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On February 16, 1999, Public Service Company of North Carolina,
Incorporated (the "Company"), SCANA Corporation, a South Carolina
corporation ("SCANA"), New Sub I, Inc., a South Carolina corporation and a
wholly-owned subsidiary of SCANA ("New Sub I"), and New Sub II, Inc., a
South Carolina corporation and a wholly-owned subsidiary of SCANA ("New Sub
II"), entered into an Agreement and Plan of Merger, dated as of February
16, 1999 (the "Merger Agreement"), providing for a merger transaction among
the Company, SCANA, New Sub I and New Sub II. The Merger Agreement and the
press release issued in connection therewith are filed herewith as Exhibits
10-G and 99-A, respectively, 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.
Pursuant to the Merger Agreement, New Sub I will merge with and into
SCANA with SCANA being the surviving entity (the "First Merger") and
immediately thereafter, the Company will merge with and into New Sub II
(the "Second Merger" and, together with the First Merger, the "Mergers"),
with New Sub II surviving as a wholly-owned subsidiary of SCANA. The
Mergers, which were approved by the boards of directors of each of the
Company and SCANA, are expected to occur shortly after all of the
conditions to the consummation of the Mergers, including the receipt of
certain regulatory approvals, are met or waived. The regulatory approval
process is expected to be completed by the end of 1999. If the approval of
the Securities and Exchange Commission under the Public Utility Holding
Company Act of 1935, as amended, has not been obtained by April 30, 2000,
then the Second Merger will be restructured to provide for the merger of
the Company into SCANA's utility subsidiary, South Carolina Electricity &
Gas Company ("SCE&G") with SCE&G surviving as a wholly-owned subsidiary of
SCANA (the "Alternative Second Merger") and the parties will amend the
terms of the Merger Agreement to make them consistent with the Alternative
Second Merger.
Under the terms of the Merger Agreement, each holder of the Company's
common stock together with associated purchase rights, other than the
Company or any wholly-owned subsidiary of the Company, or SCANA or any
wholly-owned subsidiary of SCANA, will receive either (i) $33.00 in cash
(the "Company Cash Consideration"), (ii) a number of shares of SCANA common
stock equal to the Exchange Ratio (as defined below), (the "Company Stock
Consideration"), or (iii) a combination of Company Cash Consideration and
Company Stock Consideration in respect of each share held by such holder.
Each holder of Company common stock may elect to receive Company Cash
Consideration for their shares, subject to certain limitations.
The Exchange Ratio will be equal to $33.00 divided by either (i) the
average of the closing prices of SCANA common stock for each of the 20
consecutive trading days in the period ending on the deadline for electing
the form of consideration (the "Average Price") if such Average Price is no
greater than $32.40 and no less than $22.75, (ii) $32.40 if the Average
Price of SCANA common stock is greater than $32.40, in which case the
Exchange Ratio will equal 1.02 or (iii) $22.75 if the Average Price of
SCANA common stock is less than $22.75, in which case the Exchange Ratio
will equal 1.45.
The Company Cash Merger Consideration will represent a maximum of 50%
of the total consideration received by the Company's shareholders, subject
to adjustments (i) for cash paid to holders of Company options and (ii) if
necessary, to obtain favorable tax treatment for shareholders of Company
who receive SCANA common stock in the Second Merger. In the event that
shareholders of Company elect to receive more than such amount of cash, the
cash will be proportionately allocated among those shareholders who have
elected to receive cash.
Each holder of SCANA common stock other than SCANA or any of its
subsidiaries or the Company or any of its subsidiaries will receive either
(i) $30.00 in cash per share or (ii) one share of SCANA common stock per
share (the "SCANA Stock Consideration"). SCANA will allocate $700 million
in cash for payment to the Company shareholders and SCANA shareholders
under the election process. Dependent on the amount of cash elected by the
shareholders of the Company, a minimum of approximately $350 million and a
maximum of $700 million will be allocated to SCANA shareholders who elect
cash. If shareholders of SCANA fail to elect to receive all of the cash
allocated to them, cash will be allocated among the SCANA shareholders who
have elected to receive SCANA common stock. If shareholders of SCANA fail
to elect to receive all of the shares of SCANA common stock allocated to
them, the shares will be proportionately allocated among those who have
elected to receive cash, other than (i) holders of less than 100 shares of
SCANA common stock or (ii) holders who elect to receive SCANA Stock
Consideration in respect of less than 100 shares of SCANA common stock,
each of whom who may receive cash in any event.
The Mergers are expected to be tax-free to stockholders of the Company
and SCANA to the extent that they receive shares of SCANA common stock, and
any cash received is expected to be taxed as capital gain.
The Board of Directors of the Company has received an opinion from its
investment banker, Morgan Stanley Dean Witter, to the effect that, as of
February 16, 1999, the aggregate consideration to be received by holders of
Company Common Stock pursuant to the Mergers is fair from a financial point
of view to such holders.
The Mergers are subject to certain customary closing conditions,
including without limitation, (i) the receipt of the required approval of
the Company's shareholders by an affirmative vote of a majority of the
outstanding Company common stock and of SCANA's shareholders by an
affirmative vote of two-thirds of the outstanding SCANA common stock, (ii)
the receipt of all necessary governmental approvals and the making of all
necessary governmental filings, including the consent or approval of
certain state utility regulators and the approval of the Securities and
Exchange Commission under the Public Utility Holding Company Act of 1935,
as amended and (iii) the filing of the requisite notification with the
Federal Trade Commission and the Department of Justice under the Hart-
Scott-Rodino Antitrust Improvements 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 joint proxy
statement/registration statement to be filed with respect to the SCANA
common stock to be issued pursuant to the Mergers and to solicit
shareholder votes for approval of the Mergers. Stockholder meetings to
vote upon the Mergers will be convened as soon as practicable. (See
Article VIII of the Merger Agreement.)
The Merger Agreement contains certain covenants of the parties
pending the consummation of the Mergers. Generally, the parties must each
carry on their respective businesses in the ordinary course consistent with
past practice and use all commercially reasonable efforts to preserve
intact their respective present business organizations and goodwill. In
addition, the Company's conduct is limited with respect to, among other
things, payment of dividends; issuance of securities; amendment of charter
and bylaws; acquisitions; dispositions; investments in joint ventures;
capital expenditures; incurrence of indebtedness; entrance into or
amendment of employee compensation and benefit plans; affiliate
transactions; rate matters; gas transmission and storage; contracts; and
discharge of liabilities. SCANA's conduct is limited with respect to, among
other things, payment of dividends, acquisitions and conduct of business of
New Sub I and New Sub II. (See Article VI of the Merger Agreement.)
The Merger Agreement provides that, after the effectiveness of the
Mergers, the corporate headquarters of the surviving corporation in the
Second Merger will be located in Columbia, South Carolina. SCANA
Corporation will have three new directors appointed to its board, one of
whom will be Charles E. Zeigler, Jr., the current Chairman, President and
Chief Executive Officer of the Company, the other two of whom will be
appointed from the current board of directors of the Company with one
appointment being nominated by the Company and one by SCANA. SCANA will
create a three person Office of the Chairman whose members will be (i) Mr.
Zeigler, (ii) the chairman president and chief operating officer of SCANA
and (iii) the President of SCE&G. (See Article VII of the Merger
Agreement.)
The Merger Agreement prevents the Company and its subsidiaries from
soliciting, initiating or encouraging (including by way of furnishing
information), or taking any other action to facilitate any inquiries or the
making of any offer or proposal, or engaging in negotiations with, or
providing any nonpublic information to, any third party relating to a
business combination proposal to the Company or any of its material
subsidiaries (an "Acquisition Proposal") and requires the Company to
immediately cease any existing discussions or negotiations and to notify
SCANA of any inquiries relating to an Acquisition Proposal, unless prior to
the Company's shareholder approval, (i) the Company's Board of Directors
determines in good faith, based on the advice of outside legal counsel
regarding such Board's fiduciary duties under applicable law with respect
to the Acquisition Proposal, that it is necessary to do so in order to act
in a manner consistent with its fiduciary duties under applicable law; (ii)
the Board determines, in good faith after consultation with its financial
advisors, that the third party making such Acquisition Proposal will have
adequate sources of financing to consummate such proposal and that such
proposal, if consummated as proposed, would be more favorable to
shareholders of the Company than the Mergers; and (iii) prior to furnishing
any nonpublic information or entering into negotiations with or accepting
such Acquisition Proposal, the Company promptly notifies SCANA of such
furnishing of information or negotiations and enters into a confidentiality
agreement with such third party. In this situation and if certain other
conditions are met, the Company may terminate the Merger Agreement. (See
Articles VII and IX of the Merger Agreement.)
The Merger Agreement may be terminated under certain circumstances,
including (i) by mutual consent of the parties; (ii) by either party if the
Mergers are not consummated within 15 months from the date of the Merger
Agreement, provided, that if the parties are otherwise ready to close but
certain statutory approvals have not yet been obtained, within 21 months
from the date of the Merger Agreement; (iii) by either party if either the
Company's or SCANA's stockholder approval is not obtained; (iv) by either
party if any law or regulation makes the Mergers illegal or any order or
injunction permanently prohibits the Mergers; (v) by a non-breaching party
if a breach of any representation, warranty or covenant contained in the
Merger Agreement that results in a material adverse effect occurs and is
not cured within 20 business days of written notice of such breach; or (vi)
by either party if the board of the other party has withdrawn its approval
of the Merger Agreement or its recommendation to its shareholders.
Furthermore, the Merger Agreement may be terminated by the Company if the
Company becomes the target of a third-party Acquisition Proposal and its
Board determines in good faith, based upon the advice of outside legal
counsel regarding such Board's fiduciary duties under applicable law with
respect to the Acquisition Proposal, that it is necessary to terminate the
Merger Agreement in order to act in a manner consistent with its fiduciary
duties, and concludes in good faith, after consultation with its financial
advisors, that such third party will have adequate sources of financing to
consummate such acquisition and that such Acquisition Proposal, if
consummated as proposed, would be more favorable to the shareholders of the
Company than the Mergers, provided, that prior to any such termination, the
Company must provide SCANA with proper notice and a reasonable opportunity
to adjust the terms of the Merger Agreement so as to enable the Company to
proceed with the Mergers and to negotiate in good faith with SCANA with
respect to any such adjustments. (See Articles VII and IX of the Merger
Agreement.)
The Merger Agreement provides that if a material breach (whether or
not willful) of any representation, warranty, covenant or agreement
contained in the Merger Agreement occurs or if the Board of either party
withdraws its approval or recommendation of the Merger Agreement to its
shareholders, then the non-breaching party is entitled to reimbursement of
its out-of-pocket expenses, not to exceed a total of $5 million. Each
party will also retain its remedies at law and in equity, (which shall not
be limited to $5 million), provided, that in the event of a willful breach
of the Merger Agreement by one party, the amount to be recovered by the
non-breaching party shall be no less than $28 million. A termination fee
of $28 million (minus any amounts as may have been previously paid to SCANA
for out-of-pocket expenses) will be payable by the Company to SCANA if (i)
the Merger Agreement is terminated by the Company because the Company
became the target of an Acquisition Proposal and the Company's Board
determined that termination was necessary in order to satisfy the Board's
fiduciary obligations to its shareholders, as described in more detail
above, or (ii) at the time of a termination the Company has received an
Acquisition Proposal and a transaction is consummated with the party making
such proposal (or an affiliate of such party) within two years of the
Company's termination, and the Merger Agreement is terminated (a) by the
Company or SCANA as a result of the Company shareholders' approval not
being obtained or (b) by SCANA as a result of a breach of any
representation, warranty or covenant of the Company which has not been
cured. (See Article IX of the Merger Agreement.)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
10-G Agreement and Plan of Merger, dated as of February 16, 1999,
by and among Public Service Company of North Carolina,
Incorporated, SCANA Corporation, New Sub I, Inc. and New Sub
II, Inc.
99-A Press Release of Public Service Company of North Carolina,
Incorporated and SCANA Corporation issued February 17, 1999.
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 hereunto duly authorized.
Date: February 19, 1999
Public Service Company of North Carolina, Incorporated
By: /s/ Charles E. Zeigler, Jr.
--------------------------------------------------
Chairman, President and Chief Executive Officer
Exhibit Index
Exhibit Description
10-G Agreement and Plan of Merger, dated as of February 16, 1999, by
and among Public Service Company of North Carolina, Incorporated,
SCANA Corporation, New Sub I, Inc. and New Sub II, Inc.
99-A Press Release of Public Service Company of North Carolina,
Incorporated and SCANA Corporation issued February 17, 1999.