Columbia Draws Third-Party Interest
Against the backdrop of NiSource Inc.'s hostile takeover bid for
Columbia Energy Group, a number of U.S. and foreign electric
companies are emerging as potential third-party suitors for the
diversified energy concern.
The most prominent foreign suitor being mentioned is Paris-based
Vivendi, whose U.S. assets include Sithe Energies Inc., a major
independent power producer. In the U.S., the electric companies
that are said to be closely eyeing Columbia's assets are Unicom
Corp., parent of ComEd; Cinergy Corp., which has the 12th largest
investor-owned utility system in the nation; and FirstEnergy Corp.,
whose utilities serve Ohio, Indiana and Kentucky. Even KeySpan
Energy, parent of Brooklyn Union Gas, was reported to be "very
interested" in the company. It's not clear whether the potential
suitors being rumored would be hostile or friendly.
Meanwhile, NiSource, which bid $68/share ($5.7 million) for
Columbia, said it was "encouraged with the response" of Columbia
shareholders to its tender offer so far. NiSource expects to
receive about 25-30% of the shares tendered by next week, but it
has been promised "well in excess" of that amount (above 50%), said
NiSource spokeswoman Maria Hibbs. "They're still in the hunt
obviously," remarked Donato Eassey, first vice president at Merrill
Lynch. He believes, however, NiSource will have to "up the
ante"-to at least $73/share-to capture the required number of
Columbia shares, which he estimated at about 85%.
Some industry analysts dismissed Vivendi as a viable contender,
but Eassey didn't think the French company should be ruled out.
"There is no doubt that the foreign operators would love to own the
assets of a company like Columbia...There's an opportunity, I
think, for these foreign companies to continue their dominance in
terms of size by gaining access in the U.S. We've seen some on the
West Coast, and we're likely to see more," he said. And, "there's
probably some argument that [Columbia Chairman Oliver "Rick"
Richard] would love to be owned by a foreign company versus one
that's stationed here in the U.S."
But Edward Tirello, a utility analyst for Deutsche Banc Alex.
Brown, rejected the possibility of a Vivendi-Columbia match. "I
find that hard to believe. Vivendi's an infrastructure company, but
mainly in water. It has nothing to do with gas. I would be
shocked." Vivendi would have to bid $75-$80/share to "steal this
company because they have no experience in this area."
"I expect one of the three big electric companies [Unicom,
Cinergy or FirstEnergy] to do something," Tirello said. He doesn't
view KeySpan Energy as a serious suitor. "...I'm sure they're
looking. You can't count anyone out. But having said all that, I
really think [Columbia's] out of their league."
Eassey said he could "speculate until the cows come home" about
which electric utilities are interested in Columbia. "Suffice it to
say, there isn't anyone on the electric side that wouldn't love to
own Richard's assets." But if they're at all serious about
out-bidding NiSource, Eassey noted the companies better move
quickly. "I would think that if anybody's going to do something
they'd want to do it soon knowing that NiSource already has [close
to] 30% of the shares tendered."
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