Columbia Starts Round Two, NiSource Invited
It looks like NiSource is going to get a run for its money in
the second round of a bidding war for Columbia Energy Group.
Columbia informed the Securities and Exchange Commission last week
that it has received "preliminary indications of interest from
numerous third parties" during an ongoing open house on the company
and its assets.
As a result, Columbia plans to move into the second round of
bidding, which will be open only to those parties who have shown an
interest that reflects a higher value than the hostile $74/share
($6.1 billion) bid by NiSource Inc. NiSource, however, will be
among those invited to participate in the second round, Columbia
said. There are "no guarantees that a transaction will be
completed," the company added.
Columbia turned down NiSource's revised bid shortly after it was
submitted Dec. 17 and decided to examine its other options,
including a potential sale of all or part of the company. NiSource
had first offered $68/share but was turned down repeatedly by
Columbia's board. Nevertheless, about 60% of Columbia's outstanding
shares have been tendered to NiSource.
PaineWebber analyst James Yannello said this latest SEC filing
indicates Columbia has made the right decision by testing the
market for its assets. "We (along with others) have long held that
Columbia Energy Group was worth well north of the original
$68/share all-cash offer; and through an improved bid, likely worth
north of the revised $74/share cash offer. Today's announcement (a
formal filing with the SEC; not simply a press release or
management statement), could be perceived as lending credibility to
this viewpoint as well as our long-held view of the scarcity value
associated with Columbia's strategically located asset portfolio."
Yannello said he believes the odds that Columbia will be sold in
its entirety for a price greater than $74/share "are greatly
Columbia share prices rose sharply on the news to nearly
$62/share before ending up $2.50 at $60.50/share on Tuesday.
Columbia shares settle at $61.62 on Thursday.
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