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'Numerous' Parties Eye Columbia; NiSource Extends Offer

'Numerous' Parties Eye Columbia; NiSource Extends Offer

NiSource Inc. said last week it has decided to extend its $74/share tender offer ($6.1 billion) for Columbia Energy Group's outstanding common shares until 12 a.m. Dec. 10, while it participates in the negotiation process recently set up by Columbia. Meanwhile, Columbia told the SEC yesterday it has begun negotiating with "numerous third parties," including NiSource, who are interested in reviewing non-public information about the company and considering making proposals for a potential merger or purchase transaction.

Columbia said it has sent a confidentiality agreement to NiSource to "facilitate NiSource's participation in the process." The agreement does not prevent NiSource from extending its tender offer, a Columbia spokesman said.

"We have been invited to enter the process established by the Columbia board," said NiSource CEO Gary Neale. "Therefore, we decided to extend our tender offer prior to the date many shareholders would tender their shares into our offer. We look forward to sitting down with the board and management of Columbia and remain confident that the NiSource offer is the most compelling opportunity for Columbia and all its constituencies."

Columbia, however, already has said a combination with NiSource is very unlikely. It rejected NiSource's most recent offer on Oct. 24, saying it planned to take offers from all comers in an effort to increase shareholder value beyond what its own strategic plan and any combination with NiSource could produce. NiSource was invited to participate but Columbia CEO Oliver G. (Rick) Richard said the company had "serious questions about the strategic and financial merits of a combination of our two companies, as well as about NiSource's ability to satisfy the conditions of its financing commitments and successfully complete a transaction of the magnitude required" (See Daily GPI, Oct. 26).

The process Columbia chose to follow involves exploring all options, including a potential sale or all or part of the company, a merger or reorganization (See Daily GPI, Oct. 19, June 8).

In an unrelated but important matter, Columbia is expected to make an announcement soon regarding the sale of its wholesale marketing and trading operations, which are based in Houston. Columbia said in August that it planned to sell the division, which includes about 150 employees. The division sold 945 Bcf of gas and 17.7 million MWh of power during the first six months of this year. Columbia plans to retain its retail marketing operations and focus its marketing efforts in the eastern U.S. where energy deregulation is progressing at a rapid pace.

Combined retail and wholesale marketing operations posted operating revenues of $2.5 billion and an operating loss of $32 million in the first half of this year compared to $1.2 billion in revenues and a $13.1 million loss over the same period last year.

Rocco Canonica

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