NiSource is taking its $68/share offer ($5.6 billion) directlyto Columbia Energy Group shareholders today and said it has filedlitigation against Columbia and its directors in the DelawareChancery Court in an attempt to gain an opportunity to nominate adirector to fill a vacant seat on Columbia’s board. The seat wasvacated in May when one of Columbia’s directors retired, butColumbia failed to call for a shareholder vote on a replacement atits annual meeting last month, NiSource said.

Columbia CEO Oliver G (Rick) Richard III rejected NiSource’sovertures earlier this month, saying Columbia is “not for sale andis not interested in any merger transaction in which anothercompany acquires control of Columbia.”

In a letter to Richard this week, NiSource Chairman Gary Nealesaid Columbia’s shareholders “have lost faith in your board’swillingness to act in their best interests.” NiSource claimsshareholders representing 45% of Columbia’s outstanding shares have”expressed support” for its proposal.

Neale said NiSource will attempt to secure all 83 millionoutstanding shares of Columbia common stock and intends to nominate”a slate of nominees for election” to Columbia’s board at its nextannual meeting.

“In the meantime, we intend to nominate an independent candidatefor election to your board of directors to fill the fifth Class IIIdirectorship required under your certificate of incorporation.. Weregret that we have to resort to these actions,” Neale added. “Wehave made it clear that we intend to pursue this transaction to itsend…”

Many observers and analysts have told NGI NiSource’s $68/shareoffer is too low and an offer in the low- to mid-$70s/share wouldbe more in line with Columbia’s performance. Neale confirmedyesterday NiSource is prepared to increase its cash offer if theColumbia board “agrees to cooperate with us and negotiate adefinitive merger agreement. We are spending valuable resourcespursuing this transaction without your cooperation; resources thatcould be better utilized to deliver higher value to yourstockholders.”

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