Against the backdrop of NiSource Inc.’s hostile takeover bid forColumbia Energy Group, a number of U.S. and foreign electriccompanies are emerging as potential third-party suitors for thediversified energy concern.
The most prominent foreign suitor being mentioned is Paris-basedVivendi, whose U.S. assets include Sithe Energies Inc., a majorindependent power producer. In the U.S., the electric companiesthat are said to be closely eyeing Columbia’s assets are UnicomCorp., parent of ComEd; Cinergy Corp., which has the 12th largestinvestor-owned utility system in the nation; and FirstEnergy Corp.,whose utilities serve Ohio, Indiana and Kentucky. Even KeySpanEnergy, parent of Brooklyn Union Gas, was reported to be “veryinterested” in the company. It’s not clear whether the potentialsuitors being rumored would be hostile or friendly.
Meanwhile, NiSource, which bid $68/share ($5.7 million) forColumbia, said it was “encouraged with the response” of Columbiashareholders to its tender offer so far. NiSource expects toreceive about 25-30% of the shares tendered by next week, but ithas been promised “well in excess” of that amount (above 50%), saidNiSource spokeswoman Maria Hibbs. “They’re still in the huntobviously,” remarked Donato Eassey, first vice president at MerrillLynch.He believes, however, NiSource will have to “up theante”-to at least $73/share-to capture the required number ofColumbia shares, which he estimated at about 85%.
Some industry analysts dismissed Vivendi as a viable contender,but Eassey didn’t think the French company should be ruled out.”There is no doubt that the foreign operators would love to own theassets of a company like Columbia…There’s an opportunity, Ithink, for these foreign companies to continue their dominance interms of size by gaining access in the U.S. We’ve seen some on theWest Coast, and we’re likely to see more,” he said. And, “there’sprobably some argument that [Columbia Chairman Oliver “Rick”Richard] would love to be owned by a foreign company versus onethat’s stationed here in the U.S.”
But Edward Tirello, a utility analyst for Deutsche Banc Alex.Brown, rejected the possibility of a Vivendi-Columbia match. “Ifind that hard to believe. Vivendi’s an infrastructure company, butmainly in water. It has nothing to do with gas. I would beshocked.” Vivendi would have to bid $75-$80/share to “steal thiscompany because they have no experience in this area.”
“I expect one of the three big electric companies [Unicom,Cinergy or FirstEnergy] to do something,” Tirello said. He doesn’tview KeySpan Energy as a serious suitor. “…I’m sure they’relooking. You can’t count anyone out. But having said all that, Ireally think [Columbia’s] out of their league.”
Eassey said he could “speculate until the cows come home” aboutwhich electric utilities are interested in Columbia. “Suffice it tosay, there isn’t anyone on the electric side that wouldn’t love toown Richard’s assets.” But if they’re at all serious aboutout-bidding NiSource, Eassey noted the companies better movequickly. “I would think that if anybody’s going to do somethingthey’d want to do it soon knowing that NiSource already has [closeto] 30% of the shares tendered.”
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