NiSource Inc. said last week it has decided to extend its$74/share tender offer ($6.1 billion) for Columbia Energy Group’soutstanding common shares until 12 a.m. Dec. 10, while itparticipates in the negotiation process recently set up byColumbia. Meanwhile, Columbia told the SEC yesterday it has begunnegotiating with “numerous third parties,” including NiSource, whoare interested in reviewing non-public information about thecompany and considering making proposals for a potential merger orpurchase transaction.

Columbia said it has sent a confidentiality agreement toNiSource to “facilitate NiSource’s participation in the process.”The agreement does not prevent NiSource from extending its tenderoffer, a Columbia spokesman said.

“We have been invited to enter the process established by theColumbia board,” said NiSource CEO Gary Neale. “Therefore, wedecided to extend our tender offer prior to the date manyshareholders would tender their shares into our offer. We lookforward to sitting down with the board and management of Columbiaand remain confident that the NiSource offer is the most compellingopportunity for Columbia and all its constituencies.”

Columbia, however, already has said a combination with NiSourceis very unlikely. It rejected NiSource’s most recent offer on Oct.24, saying it planned to take offers from all comers in an effortto increase shareholder value beyond what its own strategic planand any combination with NiSource could produce. NiSource wasinvited to participate but Columbia CEO Oliver G. (Rick) Richardsaid the company had “serious questions about the strategic andfinancial merits of a combination of our two companies, as well asabout NiSource’s ability to satisfy the conditions of its financingcommitments and successfully complete a transaction of themagnitude required” (See Daily GPI, Oct. 26).

The process Columbia chose to follow involves exploring alloptions, 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 tomake an announcement soon regarding the sale of its wholesalemarketing and trading operations, which are based in Houston.Columbia said in August that it planned to sell the division, whichincludes about 150 employees. The division sold 945 Bcf of gas and17.7 million MWh of power during the first six months of this year.Columbia plans to retain its retail marketing operations and focusits marketing efforts in the eastern U.S. where energy deregulationis progressing at a rapid pace.

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

Rocco Canonica

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