For Immediate Release
SCANA CORPORATION ANNOUNCES ACQUISITION OF
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INC.
Columbia, SC, and Gastonia, NC, February 17, 1999 -- SCANA Corporation
(NYSE: SCG) and Public Service Company of North Carolina, Inc. (NYSE: PGS)
announced today that they have entered into a definitive agreement whereby
SCANA will acquire PSNC in a transaction valued at approximately $900
million, including the assumption of debt. The transaction is expected to
be accounted for as a purchase and is anticipated to be accretive to
SCANA's earnings per share in 2001.
The combination of SCANA and PSNC unites two premier energy companies in
South Carolina and North Carolina and will create a company with a total
market capitalization, including debt and preferred stock, of approximately
$6 billion, serving approximately 517,000 electric customers in South
Carolina and more than 750,000 natural gas customers in South Carolina,
North Carolina and Georgia. SCANA also has a significant investment in
telecommunications companies that have more than 350,000 customers
throughout the Southeast. Based on 1998 results for the two companies,
total annual revenues for the combined company would be approximately $2
billion.
Terms of the Transaction
Under the terms of the agreement, shareholders of PSNC will receive
consideration valued at $33.00 per share. This represents an approximate 45
percent premium to PSNC's closing price on February 16, 1999. Each PSNC
shareholder may elect to receive 100 percent of the consideration in SCANA
common stock, 100 percent in cash, or a combination thereof, subject to the
total cash allocated to PSNC shareholders being no higher than 50 percent
of the total consideration received by PSNC shareholders. PSNC shareholders
who elect to receive stock will receive between 1.02 and 1.45 shares of
SCANA common stock per share of PSNC stock depending upon the average price
over a 20-day trading period of SCANA common stock prior to closing. This
equates to a collar of between $22.75 and $32.40 for SCANA shares. Based on
SCANA's closing price on February 16, 1999 of $26.81, the PSNC shareholders
would receive 1.23 SCANA shares for each PSNC share.
As part of the agreement, SCANA shareholders will have the right to
exchange their current shares of SCANA common stock for new shares of SCANA
common stock, or $30 per share in cash, such cash representing
approximately a 10 percent premium over SCANA's five-day average trading
price through February 16, 1999. SCANA will allocate $700 million in cash
for payment to PSNC and SCANA shareholders under the election process.
Dependent on the amount of cash elected by the PSNC shareholders, a minimum
of approximately $350 million and a maximum of $700 million will be
allocated to SCANA shareholders who elect cash. In the event that
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; in the event that 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 shareholders
who have elected to receive cash, other than among odd lot holders who may
receive cash in any event.
The transaction is expected to be tax-free to SCANA and PSNC shareholders
to the extent they receive SCANA common stock and any cash received is
expected to be taxed as capital gains.
Management Comments
"This acquisition is about growth, opportunity and maximizing shareholder
value in the face of the dramatic changes taking place in today's utility
industry," said William B. Timmerman, chairman, president and chief
executive officer of SCANA. "PSNC's management team has built one of the
most competitive gas distribution companies in the nation. Their expertise
will be a valuable addition to our own natural gas operations. This
combination offers us the opportunity to extend our natural gas service
area into some of the fastest growing markets in North Carolina while
nearly doubling our natural gas customer base. Both our companies share a
common mission, vision and values that are focused on competitive prices,
high quality reliable customer service and increasing shareholder value. I
am excited about the prospects that this acquisition holds for our combined
customers, shareholders and employees."
Charles E. Zeigler, Jr., chairman, president and chief executive officer of
PSNC, said, "PSNC and its employees have worked diligently to position the
Company to be an active participant in the future's dynamic energy markets
under our Plan 2001. The advanced operational goals we set for ourselves
last year under our plan are well served by partnering our highly
competitive natural gas distribution franchise in North Carolina with
SCANA's diversified electric, natural gas, and telecommunications
businesses throughout the Southeast. Through this combination, we obtain
the critical mass that facilitates significant growth opportunities for the
benefit of all our vital constituencies. Today, we have taken our boldest
step yet to position ourselves in the highly competitive energy industry of
the next century."
It is anticipated that PSNC will be operated as a wholly-owned subsidiary
of SCANA. Following the close of the transaction, Mr. Zeigler will become a
director of SCANA, a member of a three person Office of the Chairman at
SCANA Corporation, and president and chief operating officer of the PSNC
subsidiary, with responsibility for all North Carolina operations. In
addition to Mr. Zeigler, two additional PSNC current outside directors will
be named to the SCANA board following the close of the transaction.
A transition plan is currently being developed to guide the integration of
PSNC employees, facilities and customer services into SCANA. The change is
not expected to have an immediate effect on the way customers do business
with either company. The integration is expected to provide opportunities
for margin improvement and cost savings through consolidation of duplicate
functions and greater efficiencies in operations, business processes and
purchasing. All union contracts will be honored. Traditionally, SCANA has
aggressively expanded its natural gas service in South Carolina and
recently has moved into the Georgia natural gas market. This combination
will support PSNC's strong commitment to extending its natural gas services
in North Carolina.
Completion of the transaction is conditioned, among other things, upon the
approvals of the South Carolina Public Service Commission, the North
Carolina Utilities Commission, the Securities and Exchange Commission, and
the approval of both companies' common shareholders. It is anticipated that
the approval process can be completed by the end of 1999.
PaineWebber Incorporated acted as financial advisor and provided a fairness
opinion to SCANA. Morgan Stanley Dean Witter acted as financial advisor and
provided a fairness opinion to PSNC.
Common Dividend Policy
In conjunction with this transaction, SCANA announced today that its board
of directors has decided to adopt a common stock dividend policy to bring
the Company's dividend payout ratio more in line with that of
growth-oriented utilities.
SCANA's board declared a dividend of 38 1/2 cents per share of common stock
for the first quarter of 1999, unchanged from the previous quarterly rate.
The dividend is payable April 1, 1999 to holders of record at the close of
business on March 10, 1999.
For the future, SCANA's board revised the dividend policy to reflect a
dividend payout ratio of between 50 percent and 55 percent to be in line
with growth-oriented utilities as opposed to the current payout ratio of 70
percent to 75 percent. Under the new policy, the board anticipates
declaring the current dividend of 38 1/2 cents per share payable July 1,
1999 and reducing the dividend to 27 1/2 cents per share, effective with
the dividend to be paid thereafter. This action would make the Company's
indicated annual dividend rate on common stock $1.10 per share. Based on
1998 earnings of $2.12 per share, this would equate to a 52 percent payout
ratio. It is expected that the board will review the common stock dividend
on an annual basis.
"The decision to change our common stock dividend policy was not an easy
one, but it was a decision our board considered appropriate to give us the
flexibility to deal with the demands of a more competitive utility industry
while implementing our growth strategies," said Timmerman. "As competition
in our industry intensifies, we need to retain more of our earnings
internally to position the Company for growth. The resulting increase in
retained cash flow strengthens our financial position and broadens our
ability to make additional investments in our core energy businesses as
well as in new business opportunities. We believe this strength-through-
growth strategy will increase future earnings, providing a sound basis for
future growth in our dividends and stock price."
SCANA's board of directors also declared the regular quarterly dividends on
all outstanding series of cumulative preferred stock of South Carolina
Electric & Gas Company (SCE&G), its principal subsidiary, for the first
quarter of 1999. These dividends are also payable April 1, 1999 to holders
of record at the close of business on March 10, 1999. Dividends paid on
SCE&G's issues of cumulative preferred stock are not affected by the change
in the Company's common stock dividend policy.
Capital Structure
To fund the cash portion of the consideration to be paid to SCANA and PSNC
shareholders, SCANA intends to borrow approximately $700 million. This
would result in an initial consolidated debt to total capitalization ratio
for SCANA of approximately 58 percent. Pro forma for the proposed
transaction, 1998 cash flow after the payment of common dividends would
have increased by approximately $40 million in comparison to the combined
stand-alone entities after taking into account the additional interest
expense on the new indebtedness. It is anticipated that neither of the
utilities' credit ratings will be adversely affected as a result of this
transaction. It is also expected that the holding company, SCANA, would
continue to carry investment grade ratings.
The Companies
Headquartered in Columbia, SC, SCANA is a $5.3 billion (assets)
energy-based holding company whose businesses include regulated electric
and natural gas utility operations, telecommunications and other
energy-related businesses. SCANA's subsidiaries serve approximately 517,000
electric customers in South Carolina and more than 420,000 natural gas
customers in South Carolina and Georgia. SCANA also has a significant
investment in telecommunications companies that have more than 350,000
customers throughout the Southeast. SCANA had operating revenues of
approximately $1.6 billion for the twelve months ended December 31, 1998.
SCANA has about 4,700 employees. Information about SCANA and its businesses
is available on the Internet at www.scana.com.
PSNC is a $656 million (assets) energy company headquartered in Gastonia,
NC. PSNC is franchised to serve a 31-county area in North Carolina and
distributes natural gas to approximately 340,000 customers in 95 cities and
communities ranging from the Raleigh, Durham and Chapel Hill areas in the
north central part of the state; the Concord, Statesville, Gastonia and
Forest City areas in the Piedmont; to the Asheville, Hendersonville and
Brevard areas in the western part of North Carolina. PSNC, through various
subsidiaries and a joint venture, also participates in nonregulated
businesses such as natural gas brokering and supply services, and the
conversion and fueling of natural gas vehicles. PSNC's operating revenues
totaled approximately $300 million for the twelve months ended December 31,
1998. PSNC has about 1,000 employees. Information about PSNC is available
on the Internet at www.psnc.com.
This press release includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. These forward-looking
statements reflect numerous assumptions, and involve a number of risks and
uncertainties. Although both companies believe that their assumptions are
reasonable, they can give no assurance that their goals will be achieved.
The factors that could cause actual results to differ materially from those
indicated by such forward-looking statements include, but are not limited
to, the following: that the information is of a preliminary nature and may
be subject to further and/or continuing review and adjustment; regulatory
issues, including the pace of deregulation of retail natural gas and
electricity markets in the United States; changes in the economy; the
impact of competition from other energy suppliers; the management of the
companies' operations; variations in prices of natural gas and fuels used
for electric generation; growth opportunities for the companies' regulated
and nonregulated businesses; conditions of the capital and equity markets;
changes in the companies' accounting policies; abnormal weather conditions;
performance of the telecommunications companies in which SCANA Corporation
has made significant investments; inflation; exposure to environmental
issues and liabilities; changes in environmental regulations; and the other
risks and uncertainties described from time to time in the companies'
periodic reports filed with the Securities and Exchange Commission. The
companies disclaim any obligation to update any forward-looking statements.
# # #
Contacts for SCANA: Contacts for PSNC:
Media: Roger Schrum Media: Kim Bastian
(803) 217-7777 (704) 834-6333
Investors: John Winn Investors: Jack Mason
(803) 217-9240 (704) 834-6422