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Columbia Starts Round Two, NiSource Invited

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 increasing."

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.

Rocco Canonica

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