KeySpan acquires Eastern Enterprises and EnergyNorth

Nov 09, 2000 01:00 AM

KeySpan created the largest natural gas-distribution company in the Northeast with the acquisition of Eastern Enterprises of Weston, MA, and EnergyNorth of Manchester, NH. The last day of trading for Eastern or EnergyNorth common stock was on November 8, 2000. All former Eastern utilities (Boston Gas, Colonial Gas and Essex Gas) and the EnergyNorth utility (EnergyNorth Natural Gas) are now identified as KeySpan Energy Delivery.
"Today we celebrate the culmination of an ambitious effort that has forged great companies into the largest gas-distribution company in the Northeast and the fifth largest in the United States," said Robert B. Catell, chairman and CEO of KeySpan. "This expansion is a milestone in our company's history, and is a major step in implementing our strategy of growth and our vision of becoming the premier energy and services company in the Northeast. KeySpan anticipates tremendous growth for regulated and unregulated sales of natural gas and energy-related products and servicesthroughout the region."
This acquisition increases the customer base of KeySpan's regulated utilities from 1.6 to 2.4 mm natural gas customers, and creates the market potential for KeySpan to expand to more than 5 mm customers for energy and services. With market saturation for natural gas in the Northeast averaging only 35 %, the area provides opportunities for significant growth in KeySpan's regulated gas business.

The purchase is valued at approximately $ 2.5 bn -- $ 1.96 bn in equity and the assumption of $ 550 mm in debt. KeySpan will ultimately finance the purchase of the equity of Eastern and EnergyNorth by issuing $ 1.65 bn in long-term debt and the balance with commercial paper. Following a review of the transaction, S&P has upgraded its rating of KeySpan to "A" and Moody's has affirmed its "A3" rating.
KeySpan now has assets of more than $ 10 bn and projected annual revenues of $ 5 bn, resulting primarily from the consolidation of six utilities in New York and New England. With the closing, KeySpan becomes a registered holding company subject to regulation by the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935.
KeySpan expects the acquisition to yield pre-tax annual savings of approximately $ 40 mm. These savings will result primarily from the elimination of duplicate corporate and administrative programs, greater efficiencies in operations and business processes, increased purchasing efficiencies, and consolidation of information systems. KeySpan expects to achieve personnel reductions through a variety of programs, including hiring freezes, attrition, and voluntary separation programs, including early retirement. All union contracts will be honoured.

"The sale of Eastern to KeySpan is the result of our efforts to maximize shareholder value," said J. Atwood Ives, chairman and CEO of Eastern Enterprises. "On behalf of management, I would like to thank all of our employees for their hard work and professionalism in our efforts to integrate our operations with KeySpan. Together, we have created an organization that is well positioned to capitalize on the tremendous opportunities ahead of us."
His sentiments were echoed by Robert R. Giordano, recently retired president and CEO of EnergyNorth. "The acquisition is exciting news for EnergyNorth," he said. "KeySpan's size and strength will provide unprecedented services to energy customers in New England." Catell remains chairman and CEO of the combined company. Ives and Giordano have retired from active management, and Ives has been appointed to KeySpan's board of directors. KeySpan's corporate headquarters will remain in New York, while Boston will serve as headquarters for the company's New England operations.
"We have great respect for the excellent service Eastern and EnergyNorth employees have always provided their customers, and we welcome them to the KeySpan family of nearly 14,000 employees," said Catell. "We each have a proud history of more than 100 years of active community involvement -- a tradition we intend to continue."

Shareholder Transactions
Eastern Enterprises Shareholders.
-- Eastern Enterprises shareholders will receive an acquisition price of $ 64.558 per share, paid in cash. This acquisition price reflects the original $ 64.00 price, plus a "ticking fee" of $ 0.558 per share ($ 0.006 per day for 93 days, August 7 through November 7, 2000).
-- In addition, Eastern Enterprises shareholders will receive a portion of the fourth quarter dividend equal to $ 0.1692 per share. It will be paid on November 22 to shareholders of record as of November 8, 2000. The dividend calculation reflects the 36-day period from October 4 through November 8, 2000, at a rate of $ 0.0047 per day.
-- Eastern Enterprises shareholders will receive instructions from the exchange agent, EquiServe Trust, shortly after November 8, 2000. Those holding shares with a broker (or "street name") should contact the broker about receiving payment directly from that broker.

EnergyNorth Shareholders.
-- EnergyNorth shareholders will receive an acquisition price of $ 61.4587 per share, paid in cash. This acquisition price reflects the original $ 61.13 price, plus a "ticking fee" of $ 0.3287 per share (the Eastern Enterprises "ticking fee" of $ 0.558 multiplied by a pre-determined factor of.589).
-- In addition, a prorated dividend of $ 0.2683 per share will be paid on November 22 to shareholders of record as of November 8, 2000. The prorated dividend calculation reflects the 69-day period from September 1 through November 8, 2000, at a rate of $ 0.35 per quarter ($ 0.35 multiplied by 69/90).
-- EnergyNorth shareholders will receive instructions from the exchange agent, EquiServe Trust, shortly after November 8, 2000. Those holding shares with a broker (or "street name") should contact the broker about receiving payment directly from that broker.

KeySpan Shareholders.
-- This transaction does not affect existing KeySpan shareholders. Therefore, no action is required by KeySpan shareholders.

KeySpan Energy Delivery New York (formerly Brooklyn Union) is a regulated utility that sells and delivers natural gas to homes and businesses in the New York City boroughs of Brooklyn, Queens and Staten Island. KeySpan Energy Delivery Long Island (formerly Brooklyn Union of Long Island) is a regulated utility that sells and delivers natural gas to homes and businesses in Nassau and Suffolk Counties, as well as the Rockaway Peninsula of Queens County, NY.
KeySpan Energy Delivery New England (formerly Boston Gas, Essex Gas, Colonial Gas and EnergyNorth Natural Gas) is a regulated utility that sells and delivers natural gas to homes and businesses in Massachusetts and New Hampshire.
KeySpan Home Energy Services companies provide a full range of energy products and services for customers' homes, including heating, air conditioning and water heating equipment installation, service and repair. In addition, the company sells natural gas and electricity to residential customers through energy supply contracts. Eastern Enterprises' ServiceEdge, the largest unregulated provider of residential HVAC equipment installation and services in New England, will hereafter be identified as KeySpan Home Energy Services.
KeySpan Business Solutions companies provide a full range of energy products and services to businesses, ranging from the installation of HVAC systems to providing practical energy management solutions for commercial and industrial facilities. The company also offers integrated architectural, engineering, construction and O&M services, as well as financing. In addition, the company sells and manages the delivery of natural gas and electricity to its business customers through energy supply contracts.
EnergyNorth's non-utility subsidiary, ENI Mechanicals (which provides mechanical contracting and HVAC services to commercial and industrial customers through its Northern Peabody and Granite State Plumbing and Heating subsidiaries), will hereafter be identified as KeySpan Business Solutions.

KeySpan Communications owns and operates a fibre optic telecommunications network that provides capacity for internet service providers (ISP's), carriers, competitive local exchange carriers (CLEC's), businesses and educational facilities. Cooperative arrangements extend the network throughout the New York City market, with fibre access to Europe through cable landing sites on Long Island.
KeySpan myHomeKey is an Internet-based home-management business that allows customers to manage home repairs and maintenance, shop online, tailor their energy use, and customize their home security systems, among other services. The myHomeKey.com site also keeps consumers abreast of community events by allowing the sharing of information. In addition, EnergyNorth Propane and Eastern Enterprises' AMR Data Corporation and Midland Enterprises will be managed by KeySpan Energy Development Corporation.

A member of the S&P 500, KeySpan is the largest distributor of natural gas in the Northeast, with 2.4 mm gas customers. KeySpan is also the largest investor-owned electric generator in New York State and operates Long Island's electric system. In addition, KeySpan markets energy and Internet services, processes gas in Canada, and has investments in optic-optic cable, natural-gas exploration, production, pipeline transportation, distribution and storage.

Source: KeySpan Corporation via Newspage
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