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Ohio Bill Would Bolster Columbia's Defense

Ohio Bill Would Bolster Columbia's Defense

NiSource suffered two significant setbacks last week in its battle for a $5.7 billion hostile takeover of Columbia Energy Group, but the company vowed to continue its pursuit of Columbia.

A Delaware Court of Chancery judge dismissed a NiSource lawsuit aimed at forcing Columbia to reconvene its annual stockholders' meeting in order to elect a 13th member to the board of directors. NiSource claimed Columbia acted illegally in not filling the vacancy at its last annual meeting, and NiSource was seeking to elect its own representative for Columbia's board as part of its campaign to annex the Herndon, VA, company. But the judge said on Wednesday he did not believe there was a legal or practical basis for restaging the annual meeting. NiSource, which made the takeover bid in early June, has two other lawsuits targeting Columbia still to be decided.

Meanwhile, Ohio State Representative David Goodman (R-Bexley), who already has publicly opposed the merger, has introduced legislation designed to close a loophole in Ohio law that would allow hostile takeovers of gas utilities to take place without public review and scrutiny. Goodman was joined as sponsor of the legislation by 77 of the 99 members of the Ohio House of Representatives.

NiSource was expecting smooth sailing through the regulatory process in Ohio because under current Ohio law a hostile takeover bid for a gas utility is not subject to regulatory review. "This is a serious loophole that puts Ohio's natural gas customers at risk," said Goodman, who serves on the House Public Utilities Committee. "My bill would close the loophole by giving the Public Utilities Commission of Ohio (PUCO) clear and unambiguous authority to review hostile takeover bids targeting natural gas utilities in Ohio.

"This legislation is about disclosure and accountability. It would require companies like NiSource to explain, in detail and on the record, how their hostile takeover bids would be beneficial for Ohio consumers and good for the employees of Ohio's natural gas companies," he added. "If a NiSource-Columbia merger really is good for Ohio, NiSource officials should support my legislation and welcome the opportunity to stand before state regulators and testify to that effect."

If passed and signed by the governor, the Ohio legislation would require the PUCO to begin a public investigation of any hostile takeover bid for an Ohio natural gas utility at the time when a tender offer is made. It also would prohibit the PUCO from approving any hostile takeover bid for an Ohio natural gas utility unless the Commission determines that the merger would promote convenience and result in adequate, reasonably priced gas service. In addition, it would require the company seeking the hostile takeover bid to demonstrate that its proposed takeover would in fact serve the public's best interests.

Goodman said the bill has strong bipartisan support and "should send a loud and unmistakable message to potential Wall Street raiders that Ohio is serious about protecting its consumers from hostile takeovers that can't be shown to be in their best interests."

It's not the first time Goodman has spoken out against the proposal. In July, he warned regulators and legislators a takeover of Columbia by NiSource could lead to "the closing of the Columbus headquarters for Columbia Gas of Ohio, hundreds of lost jobs in Columbus and other Ohio cities, higher prices for Ohio consumers, and diminished ability of Columbia Gas to provide a reliable source of natural gas for millions of Ohioans."

Several elected officials joined Goodman last week at a news conference held near Columbia Gas of Ohio's headquarters in downtown Columbus. Supporters of his legislation included State Representative and Public Utilities Committee Chair Priscilla Mead (R-Columbus) and State Rep. Joyce Beatty (D-Columbus).

NiSource spokeswoman Maria Hibbs said last week following Goodman's announcement that the Merrillville, IN-based utility was unfazed by the legislation, which she said would merely put the state on the same regulatory footing as the other states in which NiSource would need approval of a Columbia takeover.

"We will be prepared to share our vision for the combination and why it will be beneficial for customers and shareholders [in Ohio]," she said. "Our basic corporate philosophy is to work with regulatory bodies at all levels and government officials at all levels." Hibbs also said the legal setback last week was not enough to alter the company's course. She said there has been no change in the company's offer and that it is as determined as ever to carry out its takeover plan.

NiSource's $68/share tender offer to Columbia shareholders began June 25, and the Aug. 6 deadline was extended to Oct. 15. As of Aug. 6, 60% of Columbia's outstanding shares had been tendered, according to NiSource. Columbia has repeatedly rejected NiSource's overtures, saying the offer is at the wrong price, the wrong time and is being made by the wrong company.

Rocco Canonica

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