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Gas News Release
February 22, 1999
Dominion Resources And Consolidated Natural Gas Combine
To Form $25 Billion Energy Company
RICHMOND, VA and PITTSBURGH -- Dominion Resources,
Inc. ("DRI") [NYSE: D] and Consolidated Natural Gas Company ("CNG")
[NYSE: CNG] today announced they are merging to form the nation's fourth largest
electric and natural gas utility, serving nearly 4 million retail customers
in five states. Market capitalization of the combined entity will exceed $25
billion - consisting of approximately $14.5 billion in equity, $9.5 billion
in debt and minority interests, and $1.1 billion in preferred stock.
Under the terms of the definitive merger agreement approved
unanimously by each company's board of directors, DRI will acquire all of the
shares of CNG. Under the agreement, each common share of CNG will be converted
into 1.52 shares of DRI. Based upon the closing price of DRI on Friday, February
19, 1999, this represents a premium of 25.3 percent over the average closing
stock price of CNG shares during the 20 trading day period ended February 19,
1999. DRI will issue approximately $6.3 billion in stock to CNG stockholders
to complete the transaction. CNG stockholders will own approximately 43 percent
of the combined company. It is expected to become accretive to earnings per
share by the end of the second year after completion of the transaction.
When the merger is completed, it will create the premier
fully integrated electric and gas company in the United States with approximately
$8.8 billion in revenues, $23.9 billion in assets, annual cash flow in excess
of $2 billion, and 17,000 employees. The combined company will have an energy
portfolio of more than 20,000 megawatts of power generation, 2.4 trillion cubic
feet equivalent in natural gas and oil reserves producing nearly 300 billion
cubic feet equivalent annually, and will operate a major interstate gas pipeline
system and the largest natural gas storage system in North America. The combined
company will rank as the eleventh largest independent oil and gas producer in
the United States measured by reserves.
"This is an irresistible combination. It unites two
of the most respected names in electricity and natural gas and provides us the
critical mass needed for today's dynamic energy sector," said Thos. E.
Capps, chairman, president and chief executive officer of DRI. "Fundamentally,
we are bringing together high-quality assets with excellent, complementary operations
that serve strong, neighboring gas and electric markets."
"This strategic merger will enhance value across the
energy production and delivery system - from the wellhead all the way to the
final destination, the customer. The company will be able to offer a complete
line of energy products as the $300 billion gas and electric industries continue
to converge. The energy industry is changing. Utility deregulation, competition
and fuel convergence are rapidly sweeping across the nation. Our combined company
will have the scale, scope and skills to be successful in the competitive energy
marketplace. We are creating a formidable platform for growth in a region that
is home to 40 percent of the nation's demand for energy," Mr. Capps added.
"It's a natural fit for our shareholders, customers
and employees," said George A. Davidson, Jr., chairman and chief executive
officer of CNG. "Shareholders will benefit from the earnings growth created
by a larger, strategically positioned company with a track record of financial
strength. Customers will benefit from a strong, new competitor aggressively
pursuing gas and electric retail markets. And, our employees will share in opportunities
created by one of the nation's largest and best positioned energy companies.
"Additionally, the merger aligns our own successful
leadership team with seasoned managers who are proven in the competitive marketplace.
It's also important to note that DRI and CNG have similar corporate cultures,
strategies and management styles. And each has a long history of community and
civic involvement that will continue," Mr. Davidson said.
Mr. Capps said, "We welcome the capable and experienced
employees of CNG to our DRI family. We'll work together to deliver superior
results for our customers and our owners. Our employees' skill and dedication
represent our greatest strength."
CNG shareholders will receive the DRI dividend in effect
at the time of the close of the merger. DRI currently pays an annual dividend
of $2.58 per share.
DRI anticipates achieving revenue enhancements and cost savings
of approximately $150 million to $200 million annually by 2002.
The combined entity expects to enhance revenues by:
- Aggressively marketing a complete portfolio of energy products
and services in rapidly deregulating markets in the Midwest, Mid-Atlantic, and
Northeast, comprising 40 percent of the nation's energy demand. The combined
company will have an asset network already serving a retail footprint of 4 million
customers in the region.
- Capitalizing on economies of scale and our unique set of
assets up and down the energy production and distribution value chain to become
the lowest cost provider of gas and electric products at both the wholesale
and retail levels.
- Combining our complementary asset base and existing skills
required to site, build, and operate efficient, gas-fired power generation facilities
in strategic locations in the Midwest, Mid-Atlantic and Northeast.
- Expanding exploration and production opportunities to diversify
risks and lower operating costs. The combined company will have a broad portfolio
of oil and gas reserves and production in the Gulf of Mexico, Appalachian Basin,
Rocky Mountains and Canada.
And, the companies expect to realize cost savings from the
elimination of duplicate corporate and administrative programs, greater efficiencies
in operations and business processes, and streamlined purchasing practices.
Customers will continue to enjoy the same safe, reliable service provided by
the same people who serve them today. Because this combination is based on growth,
the companies anticipate minimal workforce reductions as a result of the merger.
The company will use a combination of growth, reduced hiring and attrition to
minimize the need for employee separations. All union contracts will be honored.
Mr. Capps will be president and chief executive officer of
the combined company, and Mr. Davidson will serve as chairman until his previously
announced retirement in August 2000. The board of directors will have 17 members,
ten of whom will be designated by DRI and seven of whom will be designated by
CNG. The combined company will be named Dominion Resources and be headquartered
in Richmond, Virginia. The gas distribution, pipeline and storage operations
will continue to be headquartered in Pittsburgh. The combined company will also
maintain significant operation centers in the cities of New Orleans and Norfolk,
VA, as well as in Ohio and West Virginia.
The transaction is conditioned, among other things, upon
the approvals of shareholders of both companies, opinions of counsel on the
tax-free nature of the transaction, opinions of independent auditors that the
transaction will be treated as a pooling of interests for accounting purposes,
approvals of various federal regulatory agencies, and the completion of regulatory
processes in the states where the combined company will operate. The companies
anticipate that regulatory procedures can be completed in about 12 months.
Lehman Brothers Inc. acted as financial advisor to DRI. Merrill
Lynch & Co. acted as financial advisor to CNG. LeBoeuf, Lamb, Greene &
MacRae, L.L.P. and McGuire Woods Battle & Boothe, LLP are legal counsel
to DRI and Cahill Gordon & Reindel and Buchanan, Ingersoll P.C. are legal
counsel to CNG.
Consolidated Natural Gas Company (CNG) is one of the nation's
largest producers, transporters, distributors and retail marketers of natural
gas. The company's natural gas transmission and distribution operations serve
customers in Ohio, Pennsylvania, Virginia, West Virginia, New York and other
states in the Northeast and Mid-Atlantic regions. CNG explores for and produces
oil and natural gas in the United States and Canada, and makes selective investments
abroad.
Dominion Resources is an $18 billion holding company active
in regulated and competitive electric power, natural gas and oil development
and selected financial services. It has electric power and natural gas operations
throughout the United States and in Canada, the United Kingdom, Bolivia, Peru,
Argentina and Belize.
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934. The forward-looking
statements are subject to various risks and uncertainties. Discussion of factors
that could cause actual results to differ materially from management's projections,
forecasts, estimates and expectations may include factors that are beyond the
company's ability to control or estimate precisely, such as estimates of future
market conditions and the behavior of other market participants. Other factors
include, but are not limited to, weather conditions, economic conditions in
the company's service territory, fluctuations in energy-related commodity prices,
conversion activity, other marketing efforts and other uncertainties. Other
risk factors are detailed from time to time in the two companies' SEC reports.
Contacts for DRI: Contacts for CNG:
Media: Media:
Mark Lazenby Chet Wade
(804) 819-2042 (412) 690-1361
Hunter Applewhite Dan Donovan
(804) 819-2043 (412) 690-1370
Investors: Investors:
Thomas Wohlfarth Jim Garrett
(804) 819-2150 (412) 690-1485
Suzette Mata Dan Zajdel
(804) 819-2154 (412) 690-1241
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