Document/Exhibit Description Pages Size
1: 8-K Wisconsin Energy Corporation 9 34K
2: EX-2.1 Agreement and Plan of Merger 84 331K
3: EX-2.2 Wec Stock Option Agreement 18 79K
4: EX-2.3 Nsp Stock Option Agreement 18 78K
5: EX-2.4 Committees of the Board of Directors of Primergy 1 6K
6: EX-2.5 Form of Employment Agreement of James J. Howard 30 66K
7: EX-2.6 Form of Employment Agreement of Richard A. Abdoo 27 63K
8: EX-2.7 Amended and Restated Articles of Northern Power 37 124K
Wis Corp
9: EX-99.1 Wec Press Release 5 22K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 28, 1995
WISCONSIN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
1-9057
(Commission file number)
Wisconsin 39-1391525
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
231 West Michigan Street, P.O. Box 2949, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
(414) 221-2345
(Registrant's telephone number, including area code)
NOT APPLICABLE
-------------------------------------------------------------
(Former name or former address, if changed since last report)
FORM 8-K
WISCONSIN ENERGY CORPORATION
----------------------------
ITEM 5. OTHER EVENTS
MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY
Wisconsin Energy Corporation, a Wisconsin corporation ("WEC"), Northern States
Power Company, a Minnesota corporation ("NSP"), Northern Power Wisconsin
Corp., a Wisconsin corporation and wholly-owned subsidiary of NSP ("New NSP"),
and WEC Sub Corp., a Wisconsin corporation and wholly-owned subsidiary of WEC
("WEC Sub"), have entered into an Agreement and Plan of Merger, dated as of
April 28, 1995 (the "Merger Agreement"), which provides for a strategic
business combination involving NSP and WEC in a "merger-of-equals" transaction
(the "Transaction"). The Transaction, which was unanimously approved by the
Boards of Directors of the constituent companies, is expected to close shortly
after all of the conditions to the consummation of the Transaction, including
obtaining applicable regulatory approvals, are met or waived. The regulatory
approval process is expected to take approximately 12 to 18 months.
In the Transaction, the holding company of the combined enterprise will be
registered under the Public Utility Holding Company Act of 1935, as amended.
The holding company will be named Primergy Corporation ("Primergy") and will
be the parent company of both New NSP (which, for regulatory reasons, will
reincorporate in Wisconsin) and WEC's present principal utility subsidiary,
Wisconsin Electric Power Company ("WEPCO"), which will be renamed "Wisconsin
Energy Company." Wisconsin Energy Company will include the operations of
WEC's other present utility subsidiary, Wisconsin Natural Gas Company ("WNG"),
which is anticipated to be merged into WEPCO by year-end 1995, pending
regulatory approval, as previously planned. It is anticipated that, following
the Transaction, NSP's Wisconsin utility subsidiary, Northern States Power
Company, a Wisconsin corporation, will be merged into Wisconsin Energy
Company.
The Merger Agreement, the press release issued in connection therewith and the
related Stock Option Agreements (defined below) are filed as exhibits to this
report and are incorporated herein by reference. The descriptions of the
Merger Agreement and the Stock Option Agreements set forth herein do not
purport to be complete and are qualified in their entirety by the provisions
of the Merger Agreement and the Stock Option Agreements, as the case may be.
Under the terms of the Merger Agreement, NSP will be merged with and into New
NSP and immediately thereafter WEC Sub will be merged with and into New NSP,
with New NSP being the surviving corporation. Each outstanding share of
Common Stock, par value $2.50 per share, of NSP will be cancelled and
converted into the right to receive 1.626 shares of Common Stock, par value
$.01 per share, of Primergy ("Primergy Common Stock"). The outstanding shares
of WEC Common Stock, par value $.01 per share, will remain outstanding,
unchanged, as shares of Primergy Common Stock. As of the date of the Merger
Agreement, NSP had 67.3 million common shares outstanding and WEC had
109.4 million common shares outstanding. Based on such capitalization, the
Transaction would result in the common shareholders of NSP receiving 50% of
the common equity of Primergy and the common shareholders of WEC owning the
other 50% of the common equity of Primergy. Each outstanding share of
Cumulative Preferred Stock, par value $100.00 per share, of NSP will be
cancelled and converted into the right to receive one share of Cumulative
Preferred Stock, par value $100.00 per share, of New NSP with identical rights
(including dividend rights) and designations. WEPCO's outstanding preferred
stock will be unchanged in the Transaction.
It is anticipated that Primergy will adopt NSP's dividend payment level
adjusted for the exchange ratio. NSP currently pays $2.64 per share annually,
and WEC's annual dividend rate is currently $1.47 per share. Based on the
exchange ratio and NSP's current dividend rate, the pro forma dividend rate
for Primergy would be $1.62 per share.
The Transaction is subject to customary closing conditions, including, without
limitation, the receipt of required shareholder approvals of WEC and NSP; and
the receipt of all necessary governmental approvals and the making of all
necessary governmental filings, including approvals of state utility
regulators in Wisconsin, Minnesota and certain other states, the approval of
the Federal Energy Regulatory Commission, the Securities and Exchange
Commission (the "SEC") and the Nuclear Regulatory Commission, and the filing
of the requisite notification with the Federal Trade Commission and the
Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the expiration of the applicable waiting period
thereunder. The Transaction is also subject to receipt of assurances from the
Internal Revenue Service and opinions of counsel that the Transaction will
qualify as a tax-free reorganization, and the assurances from the parties'
independent accountants that the Transaction will qualify as a pooling of
interests for accounting purposes. In addition, the Transaction is
conditioned upon the effectiveness of a registration statement to be filed by
WEC with the SEC with respect to shares of the Primergy Common Stock to be
issued in the Transaction and the approval for listing of such shares on the
New York Stock Exchange. (See Article VIII of the Merger Agreement.)
Shareholder meetings to vote upon the Transaction will be convened as soon as
practicable and are expected to be held in the third or fourth quarter of
1995.
The Merger Agreement contains certain covenants of the parties pending the
consummation of the Transaction. Generally, the parties must carry on their
businesses in the ordinary course consistent with past practice, may not
increase dividends on common stock beyond specified levels, and may not issue
any capital stock beyond certain limits. The Merger Agreement also contains
restrictions on, among other things, charter and bylaw amendments, capital
expenditures, acquisitions, dispositions, incurrence of indebtedness, certain
increases in employee compensation and benefits, and affiliate transactions.
(See Article VI of the Merger Agreement.)
The Merger Agreement provides that, after the effectiveness of the Transaction
(the "Effective Time"), the corporate headquarters and principal executive
offices of Primergy and NSP will be located in Minneapolis, Minnesota, and the
headquarters of Wisconsin Energy Company will remain in Milwaukee, Wisconsin.
Primergy's Board of Directors, which will be divided into three classes, will
consist of a total of 12 directors, 6 of whom will be designated by WEC and 6
of whom will be designated by NSP. Mr. James J. Howard, the current Chairman
of the Board, President and Chief Executive Officer ("CEO") of NSP, will serve
as CEO of Primergy from the Effective Time until the later of 16 months after
the Effective Time or the date of the annual meeting of shareholders of
Primergy that occurs in 1998 and Chairman of Primergy until the later of July
1, 2000 or two years after he ceases to be CEO. Mr. Abdoo, the current
Chairman of the Board,
2
President and CEO of WEC, will serve as Vice Chairman of the Board, President
and Chief Operating Officer of Primergy until the date when Mr. Howard ceases
to be CEO, at which time he will assume the additional role of CEO. Mr. Abdoo
will assume the position of Chairman when Mr. Howard ceases to be Chairman.
The Merger Agreement may be terminated under certain circumstances, including
(1)
by mutual consent of the parties; (2) by any party if the Transaction is not
consummated by April 30, 1997 (provided, however, that such termination date
shall be extended to October 31, 1997 if all conditions to closing the
Transaction, other than the receipt of certain consents and/or statutory
approvals by any of the parties, have been satisfied by April 30, 1997); (3) by
any party if either NSP's or WEC's shareholders vote against the Transaction or
if any state or federal law or court order prohibits the Transaction; (4) by a
non-breaching party if there exist breaches of any representations or warranties
contained in the Merger Agreement as of the date thereof, which breaches,
individually or in the aggregate, would result in a material adverse effect on
the breaching party and which is not cured within twenty (20) days after notice;
(5) by a non-breaching party if there occur breaches of specified covenants or
material breaches of any covenant or agreement which are not cured within twenty
(20) days after notice; (6) by either party if the Board of Directors of the
other party shall withdraw or adversely modify its recommendation of the
Transaction or shall approve any competing transaction; or (7) by either party,
under certain circumstances, as a result of a third-party tender offer or
business combination proposal which such party, pursuant to its directors'
fiduciary duties, is, in the opinion of such party's counsel and after the other
party has first been given an opportunity to make concessions and adjustments in
the terms of the Merger Agreement, required to accept.
The Merger Agreement provides that if a breach described in clause (4) or (5) of
the previous paragraph occurs, then, if such breach is not willful, the non-
breaching party is entitled to reimbursement of its out-of-pocket expenses, not
to exceed $10 million. In the event of a willful breach, the non-breaching
party
will be entitled to its out-of-pocket expenses (which shall not be limited to
$10 million) and any remedies it may have at law or in equity, provided that if,
at the time of the breaching party's willful breach, there shall have been a
third party tender offer or business combination proposal which shall not have
been rejected by the breaching party and withdrawn by the third party, and
within
two and one-half years of any termination by the non-breaching party, the
breaching party accepts an offer to consummate or consummates a business
combination with such third party, then such breaching party, upon the signing
of a definitive agreement relating to such a business combination, or, if no
such
agreement is signed then at the closing of such business combination, will pay
to the non-breaching party an additional fee equal to $75 million. The Merger
Agreement also requires payment of a termination fee of $75 million (and
reimbursement of out-of-pocket expenses) by one party (the "Payor") to the other
in certain circumstances, if (i) the Merger Agreement is terminated (x) as a
result of the acceptance by the Payor of a third-party tender offer or business
combination proposal, (y) following a failure of the shareholders of the Payor
to grant their approval to the Transaction or (z) as a result of the Payor's
material failure to convene a shareholder meeting, distribute proxy materials
and, subject to its board of directors' fiduciary duties, recommend the
Transaction to its shareholders; (ii) at the time of such termination or prior
3
to the meeting of such party's shareholders there shall have been a third-party
tender offer or business combination proposal which shall not have been rejected
by the Payor and withdrawn by such third party; and (iii) within two and one-
half
years of any such termination described in clause (i) above, the Payor accepts
an offer to consummate or consummates a business combination with such third
party. Such termination fee and out-of-pocket expenses referred to in the
previous sentence shall be paid upon the signing of a definitive agreement
between the Payor and the third party, or, if no such agreement is signed, then
at the closing of such third-party business combination. The termination fees
payable by NSP or WEC under these provisions and the aggregate amount which
could
be payable by NSP or WEC upon a required purchase of the options granted
pursuant
to the Stock Option Agreements (defined below) may not exceed $125 million in
the
aggregate. (See Article IX of the Merger Agreement.)
Concurrently with the Merger Agreement, the parties have entered into reciprocal
stock option agreements (the "Stock Option Agreements") each granting the other
an irrevocable option to purchase up to that number of shares of common stock of
the other company which equals 19.9% of the number of shares of common stock of
the other company outstanding on April 28, 1995 at an exercise price of $44.075
per share of NSP common stock or $27.675 per share of WEC common stock, as the
case may be, under certain circumstances if the Merger Agreement becomes
terminable by one party as a result of the other party's breach or as a result
of the other party becoming the subject of a third-party proposal for a business
combination. Any party whose option becomes exercisable (the "Exercising
Party")
may request the other party to repurchase from it all or any portion of the
Exercising Party's option at the price specified in the Stock Option
Agreements.
(See the Stock Option Agreements).
Primergy is expected to be the tenth-largest investor-owned utility company in
the United States based on the $6.0 billion current combined market
capitalization of WEC and NSP. For the year-ended December 31, 1994, the
combined revenues of WEC and NSP were $4.2 billion, with total assets of more
than $10 billion. Primergy will serve approximately 2.3 million electric
customers and 750,000 natural gas customers. Its service territory will include
portions of Minnesota, Wisconsin, North Dakota, South Dakota and the Upper
Peninsula of Michigan. The business of Primergy will consist of utility
operations and various non-utility enterprises, including independent power
projects.
A preliminary estimate indicates that the Transaction will result in net savings
of approximately $2.0 billion in costs over 10 years. The synergies created by
the Transaction will allow the companies to implement a reduction in electric
retail rates followed by a rate freeze for electric retail customers through the
year 2000.
Following announcement of the Transaction, on May 1, 1995 Standard & Poor's
Corporation ("S&P") reported that it was placing on CreditWatch with negative
implications its AA+ senior secured debt and AA+ preferred stock ratings of
WEPCO
and its AA senior unsecured debt rating of Wisconsin Michigan Investment
Corporation (a non-utility subsidiary of WEC). In addition, S&P indicated that
while its AA senior secured debt rating of WNG would remain on CreditWatch,
where
it was placed on April 25, 1994, the implications were revised to negative from
4
positive. S&P stated that if the Transaction is completed, the likely credit
rating for the senior secured debt of WEPCO is expected to be AA or AA-. As
part
of its ratings process, S&P intends to review the financial and operating plans
of the merged utilities. Also on May 1, 1995, citing WEPCO's continued
operation
as a separate utility subsidiary after the Transaction, its strength within its
rating category and its strong capital structure, Moody's Investors Service
confirmed its Aa2 first mortgage bond rating of WEPCO.
Both NSP and WEC recognize that the divestiture of their existing gas operations
and certain non-utility operations is a possibility under the new registered
holding company structure, but will seek approval from the SEC to maintain such
businesses. If divestiture is ultimately required, the SEC has historically
allowed companies sufficient time to accomplish divestitures in a manner that
protects shareholder value.
5
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS. The following exhibits are filed herewith:
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by
and among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub
Corp. (1)
2 WEC Stock Option Agreement, dated as of April 28, 1995, by and
among Northern States Power Company and Wisconsin Energy
Corporation.
3 NSP Stock Option Agreement, dated as of April 28, 1995, by and
among Wisconsin Energy Corporation and Northern States Power
Company.
4 Committees of the Board of Directors of Primergy Corporation.
5 Form of Employment Agreement of James J. Howard.
6 Form of Employment Agreement of Richard A. Abdoo.
7 Form of Amended and Restated Articles of Incorporation of
Northern Power Wisconsin Corp.
(99)-1 Press Release, dated May 1, 1995, of Wisconsin Energy
Corporation.
____________________
(1) The registrant agrees to furnish supplementally any omitted exhibits or
schedules to the Commission upon request.
6
FORM 8-K
WISCONSIN ENERGY CORPORATION
-----------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WISCONSIN ENERGY CORPORATION
------------------------------------
(Registrant)
/s/ J. G. Remmel
------------------------------------
Date: May 3, 1995 J. G. Remmel, Vice President, Treasurer
and Chief Financial Officer
WISCONSIN ENERGY CORPORATION
____________________________
EXHIBIT INDEX
Current Report on Form 8-K
Report Dated April 28, 1995
Exhibit
Number
-------
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995,
by and among Northern States Power Company, Wisconsin
Energy Corporation, Northern Power Wisconsin Corp. and WEC
Sub Corp.
2 WEC Stock Option Agreement, dated as of April 28, 1995, by
and among Northern States Power Company and Wisconsin
Energy Corporation.
3 NSP Stock Option Agreement, dated as of April 28, 1995, by
and among Wisconsin Energy Corporation and Northern States
Power Company.
4 Committees of the Board of Directors of Primergy
Corporation.
5 Form of Employment Agreement of James J. Howard.
6 Form of Employment Agreement of Richard A. Abdoo.
7 Form of Amended and Restated Articles of Incorporation of
Northern Power Wisconsin Corp.
(99)-1 Press Release, dated May 1, 1995, of Wisconsin Energy
Corporation.
Dates Referenced Herein and Documents Incorporated by Reference
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