NiSource Takes Offer to Columbia Shareholders
Determined to fight to the end, NiSource took its $68/share
offer ($5.6 billion) directly to Columbia Energy Group shareholders
on Friday. It also filed litigation against Columbia and its
directors in the Delaware Chancery Court in an attempt to gain an
opportunity to nominate a director to fill a vacant seat on
The seat was vacated in May when one of Columbia's directors
retired, but Columbia failed to call for a shareholder vote on a
replacement at its annual meeting last month, NiSource said.
NiSource Chairman Gary Neale said his company will attempt to
secure all 83 million outstanding shares of Columbia common stock
and intends to nominate "a slate of nominees for election" to
Columbia's board at its next annual meeting.
"In the meantime, we intend to nominate an independent candidate
for election to your board of directors to fill the fifth Class III
directorship required under your certificate of incorporation.. We
regret that we have to resort to these actions," Neale added. "We
have made it clear that we intend to pursue this transaction to its
Columbia CEO Oliver G (Rick) Richard III rejected NiSource's
overtures earlier this month, saying Columbia is "not for sale and
is not interested in any merger transaction in which another
company acquires control of Columbia."
In a letter to Richard this week, Neale said Columbia's
shareholders "have lost faith in your board's willingness to act in
their best interests." NiSource claims shareholders representing
45% of Columbia's outstanding shares have "expressed support" for
NiSource's strategy is to create a "natural gas distribution
corridor" between Chicago and New England and between the Gulf
Coast region and the Northeast. NiSource closed on a $780 million
acquisition of Massachusetts-based Bay State Gas Co. in February
and in April completed a $150 million purchase of TPC Corp., which
owns a network of high-deliverability salt cavern storage
facilities in the eastern U.S.
A combination with Columbia would more than double the size of
Merrillville, IN-based NiSource, creating a company with a market
capitalization of $8.3 billion. It would be one of the largest
energy distribution companies in the country with nearly four
million electric, gas and propane distribution customers, 19,000
miles of pipelines connecting the Texas Gulf Coast and the Atlantic
coast, 700 Bcf of total storage capacity, and 800 Bcf of gas
Many observers and analysts that have spoken with NGI like the
strategy behind the transaction but most also believe NiSource's
$68/share offer is too low compared to what Columbia is worth.
Merrill Lynch's Donato Eassey and Donaldson, Lufkin &
Jenrette's Curt Launer, both veteran energy analysts, said an offer
in the low- to mid-$70s/share would be more in line with Columbia's
worth. Both also expect other companies to enter the bidding,
although so far that has not happened.
Neale reiterated last week that NiSource is prepared to increase
its cash offer if the Columbia board "agrees to cooperate with us
and negotiate a definitive merger agreement.
"We are spending valuable resources pursuing this transaction
without your cooperation; resources that could be better utilized
to deliver higher value to your stockholders."
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