NiSource Inc. and Columbia Energy Group formally complete theirmerger today, after the U.S. Securities and Exchange Commissiongave it final approval this week. The combined company, which willserve 3.6 million gas and electric customers in nine states, willtrade as NiSource on the New York Stock Exchange. Columbia’s shareswill cease trading before the market opens Thursday.

The SEC order had one requirement: To comply with the PublicUtility Holding Company Act of 1935, NiSource must divest IWCResources Corp., a water operations subsidiary based inIndianapolis, within three years. The Act requires utility holdingcompanies divest operations not integral to their primary business.

The $6 billion merger, first announced in a hostile takeover bidJune 1999 (see Daily GPI, June 8, 1999),establishes one of the largest U.S. natural gas distributors east ofthe Rocky Mountains. NiSource will access a high growth energycorridor that is home to 30% of the U.S. population and 40% of itsenergy consumption.

NiSource CEO Gary L. Neale applauded SEC’s decision to grantfinal approval of the merger, saying the transaction creates “asuper-regional energy powerhouse stretching from the Gulf of Mexicoto Chicago and New England.” He said the approval’s “fast track”was a “testament to the hard work on both sides of the regulatorytable” and the teamwork of both companies’ employees.

Under the merger agreement, Columbia shareholders had the rightto elect to receive NiSource stock for their Columbia shares, withthe election time expiring Monday (Oct. 30). According to NiSource,preliminary indications showed that more than 60% of Columbia’sshares elected to receive NiSource stock, with the exchange ratio3.04414 NiSource shares for each Columbia share.

Shares not exchanged for stock will be exchanged for $70 in cashand $2.60 face amount of a Stock Appreciation Income LinkedSecurities, or SAILS, a unit consisting of a zero coupon debtsecurity and a forward equity contract. Existing NiSource shareswill automatically be converted into common stock of the newcorporation.

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