UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of
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[X] Soliciting Material Pursuant to Section 240.14a-12
KeySpan Corporation
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The following communications were distributed to all employees through our
internal email system and will be posted on our internal KeySpan website. They
will also be printed and posted in common areas of KeySpan's facilities (i.e
elevator banks, employee lounges, areas where publications are generally located
and available for employees to pick up and read, etc.) for employees to read.
Communication #1:
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First Two Issues of: National Grid/KeySpan Integration Update
As we move forward with the National Grid/KeySpan integration, communication
will play a critical role.With that in mind, we've attached the first two
installments of what will become a series of National Grid/KeySpan Integration
Update communications.
The first two issues of this publication address frequently asked questions
submitted by employees to the Merger Hotline, including questions regarding the
effect of the transaction on their KeySpan Common Stock holdings in the Employee
Discount Stock Purchase Plan and the KeySpan 401(k) Plan.
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Communication #2.
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nationalgrid KEYSPAN Integration Update
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Volume I Issue I March 2006
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Your Top 10 Qs (and As) on the Merger
As we move forward with the National Grid/KeySpan integration, it will become
easier to answer more of your questions about the merger. In the meantime, we've
put together the first in what will be a series of Integration Update
communications with information as complete as possible in these preliminary
stages of the transaction.
Also, managers and officers throughout the Company will address issues and
concerns specific to their areas as we move through this integration process
together.
1. Why did KeySpan decide to sell?
The timing is favorable from both regulatory and economic vantage points. New
federal regulations on interstate ownership of utilities make it easier for
companies to buy and sell assets. This has resulted in consolidations in our
industry as companies seek to drive increased shareholder value. Utility
valuations are also relatively high, so selling now provides an attractive
opportunity to deliver significant value to our shareholders.
2. Why did we accept National Grid's offer?
National Grid's all-cash offer for KeySpan will provide our shareholders the
best return on their investment, with an immediate premium to the unaffected
closing stock price. And from a customer perspective, National Grid has an
impressive track record in delivering safe, reliable, efficient, low-cost
service. Finally, National Grid intends to leverage its technology expertise to
introduce efficiencies and best practices that will improve performance and
benefit customers over the long term.
3. What attracted National Grid to KeySpan?
The KeySpan acquisition is a natural extension of National Grid's U.S. growth
strategy. KeySpan is a leading gas and electric delivery company. It's an
excellent geographic, operational and strategic fit. We also have a strong
operational track record and good growth prospects, particularly in the
diversified, strong and growing Long Island and metropolitan areas, which
provide an excellent foundation for continued economic growth.
The combined company, which will be the third largest energy delivery company in
the U.S., will have greater resources available to enhance generation assets and
energy delivery infrastructure, as well as enjoy synergies that will benefit
customers.
4. How will the transaction impact our electric business operations - the LIPA
relationship and electric generation?
LIPA continues to receive the highest level of service and we are committed to
continue that. The relationship with LIPA is very important to KeySpan, and we
will continue to operate and provide services to LIPA with existing personnel
under the KeySpan name. Continuing efficiency/service investments for the
benefit of LIPA's one million customers remains a high priority.
One thing to keep in mind: Although LIPA doesn't have a say in the approval
process of our deal with National Grid, a change of control does allow them to
consider the Management Services Agreement (MSA) contract in default. As many
employees know, we just completed negotiations on a very favorable new contract
for LIPA's customers that would last through 2013. So in the coming months,
we'll be working hard to convey the positive nature of this deal to LIPA
customers. We'll be working with government on all levels to keep them informed
of the benefits to consumers and our employees. We'll also be helping LIPA with
its analysis and taking our own very detailed look into potential benefits for
gas and electric customers.
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Your Top 10 Qs (and As) on the Merger
Continued from front
As far as electric generation goes, National Grid has no current plans to divest
KeySpan's generation portfolio, which is substantially supported by long-term
contracts with LIPA and the attractive characteristics of the New York City
capacity market.
5. Who will be responsible for integrating the two companies? How will decisions
be made?
An Integration Team with members from both organizations will be appointed to
carefully, thoroughly and thoughtfully study how we will consolidate the
businesses. John Caroselli, KeySpan EVP and Chief Strategy Officer, has been
selected to lead the National Grid-KeySpan integration effort on behalf of
KeySpan. John will work with Kwong Nuey, SVP and Chief Information Officer, who
will be the integration team lead for National Grid. They will put together a
team of National Grid and KeySpan delegates who will work over the next several
months to identify how the combined companies will operate once the merger goes
forward.
6. How will this acquisition affect my department or a major project that I'm
working on?
Honestly, it's too soon to tell. But things will become clearer once the
Integration Team begins to look at how we can combine our companies' expertise
and best practices to create greater efficiencies and one stronger company.
Throughout this process, it's really important for employees to remain focused
on providing the best possible service to customers.
7. Will there be cuts in union or management positions?
National Grid will honor all labor agreements currently in effect with KeySpan
unions, and all KeySpan employees will become National Grid employees upon
completion of the acquisition. The Integration Team will study how best to
integrate the businesses, including looking at where we may have duplicate
functions. They will be guided by how best to deliver safe, reliable, efficient
service to customers. As in past mergers, we expect to achieve any job
reductions through attrition and voluntary programs.
8. Will facilities be closed or departments moved to different facilities?
We expect to find that certain facilities can be combined. But it's too early to
discuss specifically what may happen. The Integration Team will be looking at
this and we will communicate decisions as soon as possible after they're made.
9. How will my benefits be affected?
Will KeySpan employees be moved into the National Grid compensation and benefits
plans? Both companies offer comprehensive benefits packages. As a condition of
the merger, National Grid will provide non-union KeySpan employees with an
aggregate benefits package equivalent to KeySpan's current benefits program for
two years after the merger closes. During the integration process, the benefits
plans at both KeySpan and National Grid will be reviewed. One of the Integration
Team's requirements is to develop recommendations for a benefits program for
non-union employees; National Grid will continue to provide the benefits
packages negotiated for KeySpan's union employees. Going forward, the combined
company is committed to providing a competitive wage and benefits package to all
employees.
10. Where is National Grid stock traded, and will employees be able to purchase
it at a discount?
National Grid ordinary shares are traded in the U.K. on the London Stock
Exchange under the ticker symbol "NG." In the U.S., National Grid stock is
traded on the New York Stock Exchange as an American Depositary Share (ADS)
under the ticker symbol NGG; each ADS represents five ordinary shares traded on
the London Exchange. Currently, there is no discount stock purchase plan for
employees. National Grid shares are, however, offered as an investment option
under National Grid 401(k) plans.
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Communication #3
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nationalgrid KEYSPAN Integration Update
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Volume I Issue II March 2006
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Important Information Regarding
KeySpan Common Stock Through Your Employee Plans
Since the National Grid transaction was announced, employees have raised many
questions regarding the effect of the transaction on their KeySpan Common Stock
holdings in the Employee Discount Stock Purchase Plan and the KeySpan 401(k)
Plan. The following answers respond to employees' most frequently asked
questions:
Employee Discount Stock Purchase Plan (EDSPP)
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Q. What happens to my shares of KeySpan Common Stock in my EDSPP account once
the acquisition occurs?
A: Once the acquisition occurs, National Grid will purchase all outstanding
shares of KeySpan Common Stock for $42 per share (the transaction price). At
that time, any shares that you have in your account will be converted to cash.
You will receive a payment for the cash proceeds which will have tax
consequences in the year in which the acquisition occurs.
Q. Can I exchange my shares of KeySpan Common Stock for shares of National Grid?
A: No. The transaction only provides for a cash purchase of each share of
KeySpan Common Stock at $42.
Q. What are the tax consequences with respect to shares purchased under the
current plan?
A: After the acquisition, you will receive a cash payout equal to the $42 per
share transaction price. There are different tax consequences depending upon how
long you've held the shares in the EDSPP. We are still checking the impact of
various IRS pronouncements on the tax consequences of selling stock acquired
under this EDSPP (and its predecessors) as it existed prior to May 2003. The
following is a summary of the potential tax impact from the sale of shares
purchased within the current (post May 2003) EDSPP:
For gain on sales of shares acquired under the current EDSPP (post May 2003)
A: In general, your overall taxable gain resulting from the sale on your stock
in the EDSPP to National Grid will be equal to the difference between the sale
price ($42) and the discounted price (purchase price less the 10% discount) you
paid for the stock.
Part of the gain is compensation (ordinary) income, and part is capital gain.
Under the current EDSPP (post May 2003) the compensation (ordinary) income part
is an amount equal to the discount granted at the time of purchase. The balance
of the gain is capital gain. If the stock was held for more than one year, the
capital gain part will be long term capital gain. If the stock was held for less
than one year, the capital gain part will be a short term capital gain.
PLEASE NOTE: You will receive additional information in future communications
regarding sales of shares acquired under the EDSPP and related tax implications.
You should consult your tax advisor for more information regarding the potential
tax impact on your tax return.
Q. Will I be able to continue my contributions to the EDSPP up until the
transaction is consummated?
A: Currently, you may continue to make contributions to the EDSPP and continue
to receive a 10% discount on the purchase of KeySpan shares through the EDSPP.
However, the provisions of the EDSPP are subject to review by KeySpan's Board of
Directors at any time.
Q. How can I change my payroll deductions or enroll in the EDSPP?
A: In order to change your payroll deductions or enroll in the EDSPP you must
complete an "EDSPP Form for Payroll Deduction Authorization, Change or
Cancellation" and forward it to the appropriate payroll department listed on the
form. To access this form go to the Intranet Homepage and click on Need a Form?
under Quick Links. Once you have accessed the forms page the EDSPP form can be
found under the Stock Plans Area.
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KeySpan 401(k) Plan
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Q. Will the KeySpan Common Stock Fund remain an investment option in the Plan?
A. Until the transaction is consummated, KeySpan anticipates that the KeySpan
Common Stock Fund will remain an investment option in the Plan. Therefore, no
action needs to be taken at this time if you'd like to continue to invest in the
KeySpan Common Stock Fund. Once the transaction is consummated, the KeySpan
Common Stock Fund will be eliminated as an option in the Plan.
Q. What will happen to my investment in the KeySpan Common Stock Fund once the
merger transaction is consummated?
A. At the time of merger, National Grid will purchase all outstanding shares of
KeySpan Common Stock for $42 per share and any holdings you have in the KeySpan
Common Stock Fund will be converted to cash. At that time, you will be able to
allocate the cash proceeds to another investment option within the Plan's
then-current fund lineup.
Q. Can I still allocate contributions to the KeySpan Common Stock Fund?
A. Yes. We anticipate that until the transaction is consummated, you will
continue to be able to allocate all or a portion of your Pre-Tax Contributions
and/or your Employer Matching Contributions to the KeySpan Common Stock Fund.
Please note that continued investment in any fund offered under the Plan,
including the KeySpan Common Stock Fund, is subject to the discretion of the
KeySpan Investment Review Committee.
Q. Will I still receive a discount on the purchase of KeySpan Common Stock in
the Plan?
A. Yes. If you are currently eligible, you will continue to receive a 10%
discount on the purchase of KeySpan Common Stock in the KeySpan Common Stock
Fund.
Q. Will I still receive dividends on KeySpan Common Stock in the KeySpan Common
Stock Fund?
A. Yes. As long as KeySpan's Board of Directors continues to declare dividends,
you will continue to receive dividends on any KeySpan Common Stock holdings you
have in the Plan until the transaction is consummated.
Q. Can I exchange my holdings in the KeySpan Common Stock Fund to purchase
shares of National Grid?
A. No. Currently National Grid shares are not an investment option in the Plan.
Please be assured that KeySpan is committed to keeping you informed about any
changes to the EDSPP and the KeySpan 401(k) Plan and will continue to
communicate with you as KeySpan and National Grid work toward the consummation
of the transaction.
If you have questions about your EDSPP account, please contact Computershare at
(800) 666-7401. If you have questions about your KeySpan 401(k) account please
contact Vanguard at 1-800-523-1188 or visit vanguard online at www.vanguard.com.
Any other questions you may have regarding how the National Grid acquisition of
KeySpan will affect your holdings in your employee plans please contact
KeySpan's Stock Plans Hotline at (718) 403-3131 or e-mail the Stock Plans Group
at financial@keyspanenergy.com.
Additional Information and Where to Find It
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KeySpan intends to file with the Securities and Exchange Commission ("SEC") a
proxy statement and other relevant documents in connection with the proposed
transaction between KeySpan and National Grid Investors and security holders of
KeySpan are advised to read the proxy statement and other relevant documents
when they become available, as they will contain important information about the
transaction. Investors and security holders may obtain a free copy of the proxy
statement and other documents filed by KeySpan with the SEC, when they become
available, at the SEC's web site at http://www.sec.gov.
KeySpan and its directors, executive officers and other members of its
management and employees may be deemed to be participants in the solicitation of
proxies from its security holders in connection with the proposed transaction.
Information concerning the interests of KeySpan's participants in the
solicitation is set forth in KeySpan's most recent proxy statement and Annual
Report on Form 10-K filed (filed with the Securities and Exchange Commission on
March 30, 2005 and March 2, 2006, respectively) and will be set forth in the
proxy statement relating to the merger when it becomes available.
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Additional Information and Where to Find It
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KeySpan intends to file with the Securities and Exchange Commission (the "SEC")
a proxy statement and other relevant documents in connection with the proposed
acquisition of KeySpan by National Grid. Investors and security holders of
KeySpan are advised to read the proxy statement and other relevant documents
when they become available, as they will contain important information about the
transaction. Investors and security holders may obtain a free copy of the proxy
statement and other documents filed by KeySpan with the SEC, when they become
available, at the SEC's web site at http:/www.sec.gov.
KeySpan and its directors, executive officers and other members of its
management and employees may be deemed to be participants in the solicitation of
proxies from its security holders in connection with the proposed acquisition.
Information concerning the interests of KeySpan's participants in the
solicitation is set forth in KeySpan's most recent proxy statement and Annual
Report on Form 10-K (filed with the SEC on March 30, 2005 and February 28, 2006,
respectively) and will be set forth in the proxy statement relating to the
acquisition when it becomes available.
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