[Federal Register Volume 61, Number 166 (Monday, August 26, 1996)]
[Notices]
[Pages 43795-43797]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21608]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26555]


Filings Under the Public Utility Holding Company Act of 1935, as 
amended (``Act'')

August 16, 1996.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated thereunder. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendments thereto is/are available for public 
inspection through the Commission's Office of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by September 9, 1996, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in case of an attorney at law, by 
certificate) should be filed with the request. Any request for hearing 
shall identify specifically the issues of fact or law that are 
disputed. A person who so requests will be notified of any hearing, if 
ordered, and will receive a copy of any notice or order issued in the 
matter. After said date, the application(s) and/or declaration(s), as 
filed or as amended, may be granted and/or permitted to become 
effective.

Cinergy Corp., et al. (70-8881)

Notice of Proposal To Amend Articles of Incorporation and Acquire Stock 
of Utility Subsidiary Pursuant To Tender Offer; Order Authorizing 
Solicitation of Proxies

    Cinergy Corp., a registered holding company, and its wholly-owned 
public-utility subsidiary company, The Cincinnati Gas & Electric 
Company (``CG&E''), both located at 139 East Fourth Street, Cincinnati, 
Ohio 45202, have filed an application-declaration under sections 6(a), 
9(a), 10 and 12(e) of the Act, and rules 51, 52, 54, 62 and 65 
thereunder.
    CG&E's amended articles of incorporation (``Articles'') currently 
provide that, without the consent of the holders of not less than a 
majority of the total number of shares of preferred stock of all series 
then outstanding, CG&E shall not issue or assume any securities 
representing unsecured debt (other than for purposes of refunding 
outstanding unsecured indebtedness or redeeming or otherwise retiring 
outstanding shares of stock ranking prior to the preferred stock with 
respect to the payment of dividends or upon the dissolution, 
liquidation or winding up of CG&E) if, immediately after such issue or 
assumption, the total outstanding principal amount of all securities 
representing unsecured debt would exceed 20% of the aggregate of: (1) 
The total principal amount of all then outstanding secured debt of 
CG&E and (2) the capital and surplus of CG&E, as stated on CG&E's 
books (``20% Limitation''). CG&E has outstanding 89,663,086 shares of 
common stock, $8.50 par value per share (``Common Stock''), all of 
which is held by Cinergy. CG&E's outstanding preferred stock, all of 
which is publicly held, consists of two million shares of cumulative 
preferred stock, par value $100 per share (``Preferred Stock''), issued 
in four series (each a ``Series'').\1\ The Common Stock and Preferred 
Stock of each Series are entitled to one vote per share.
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    \1\ The four Series of Preferred Stock consist of a 4% Series, 
of which 270,000 shares are outstanding, a 4\3/4\% Series, of which 
130,000 shares are outstanding; a 7\3/8\% Series, of which 800,000 
shares are outstanding; and a 7\7/8\% Series, of which 800,000 
shares are outstanding.

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[[Page 43796]]

    CG&E proposes to submit to the holders of the outstanding shares of 
Preferred Stock of all Series, and to Cinergy, as the sole holder of 
all the outstanding shares of Common Stock, a proposal to amend the 
Articles to eliminate the 20% Limitation by deleting it in its entirety 
from the Articles (``Proposed Amendment'').\2\ Approval of the Proposed 
Amendment requires the affirmative vote at a special meeting (in person 
by ballot or by proxy) of the holders of not less than two-thirds of 
the total number of shares of Preferred Stock of all four Series, 
voting together as one class, and two-thirds of the Common Stock. 
Cinergy has informed CG&E that it will vote in favor of the Proposed 
Amendment. CG&E proposes to submit the Proposed Amendment for 
consideration and action at a special meeting of its stockholders to be 
held on or about September 18, 1996 (``Special Meeting'') and, in 
connection therewith, proposes to solicit proxies from the holders of 
its outstanding shares of Preferred Stock and Common Stock for use at 
the Special Meeting (``Proxy Solicitation'').\3\ If the Proposed 
Amendment is adopted, CG&E will make a special cash payment of $1.00 
per share (``Cash Payment'') to each preferred stockholder who voted 
(in person by ballot or by proxy) his or her shares of Preferred Stock 
(each a ``Share'') in favor of the Proposed Amendment (except that no 
Cash Payment will be made with respect to any Share validly tendered 
pursuant to the concurrent tender offer described below). All Cash 
Payments will be disbursed out of CG&E's general funds.
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    \2\ CG&E states that it is seeking to eliminate the 20% 
Limitation because it impedes CG&E's ability to fully avail itself 
of the benefits of short-term debt in order to maintain financial 
flexibility and minimize its financing costs, and thus works to the 
detriment of CG&E's utility customers and, indirectly, Cinergy's 
investors. CG&E also states that it will be at a competitive 
disadvantage if the 20% Limitation is not removed because new 
competitors in the utility industry (such as power marketers, 
independent power producers and owners of cogeneration facilities) 
generally are not subject to similar financing restrictions in their 
organizational documents. CG&E notes that it recently received 
authorization from the Public Utilities Commission of Ohio (Order 
dated May 4, 1995 in Case No. 95-358 GE-AIS) to increase the maximum 
amount of short-term debt it is permitted to have outstanding at any 
one time from $200 million to $400 million. Because of the 20% 
Limitation, CG&E currently has available only approximately $150 
million of unsecured debt capacity (short-term or otherwise), based 
on capitalization as of March 31, 1996. CG&E anticipates that any 
issuances or sales by it of unsecured debt following adoption of the 
Proposed Amendment will be exempt from section 9(a) of the Act by 
virtue of rule 52.
    \3\ CG&E has engaged MacKenzie Partners, Inc. to act as 
information agent in connection with the Proxy Solicitation for a 
fee of approximately $35,000 which includes reimbursement of 
reasonable out-of-pocket expenses.
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    Concurrently with the commencement of the Proxy Solicitation by 
CG&E, and subject to the terms and conditions stated in an Offer to 
Purchase and Proxy Statement and accompanying Letters of Transmittal 
and Proxy (collectively ``Offer Documents''), Cinergy proposes to make 
an offer (``Tender Offer'') to acquire from the holders of the 
Preferred Stock of each Series any and all shares of that Series at 
respective cash purchase prices of $64 per Share, in the case of the 4% 
Series; $80 per Share, in the case of the 4\3/4\% Series; $110 per 
Share, in the case of the 7\3/8\% Series; and $116 per Share, in the 
case of the 7\7/8\% Series (each, a ``Purchase Price'').\4\ The Tender 
Offer will consist of separate offers for each of the four Series, with 
the offer for any one Series being independent of the offer for any 
other Series. Applicants anticipate that the Tender Offer will expire 
at 5:00 p.m. on the date of the Special Meeting, i.e., on or about 
September 18, 1996 (``Expiration Date''), but it may be extended or 
terminated early under certain circumstances.\5\ Tenders of Shares made 
pursuant to the Tender Offer may be withdrawn at any time prior to the 
Expiration Date. Thereafter, such tenders will be irrevocable, subject 
to certain exceptions identified in the Offer Documents. The Tender 
Offer will not be conditioned upon any minimum number of Shares of the 
applicable Series being tendered. However, Cinergy's obligation to 
proceed with the Tender Offer and to accept for payment and to pay for 
any Shares tendered will be subject to various conditions enumerated in 
the Offer Documents, including the receipt of Commission authorization 
under the Act to acquire the tendered Shares and the approval and 
adoption of the Proposed Amendment at the Special Meeting. Shares 
validly tendered will be held by Cinergy until the Expiration Date (or 
returned in the event the Tender Offer is terminated). Subject to the 
terms and conditions of the Offer Documents, as promptly as practicable 
after the Expiration Date, Cinergy will accept for a payment (and 
thereby purchase) and pay for the Shares validly tendered and not 
withdrawn.\6\ Cinergy intends to use its general funds and/or funds 
borrowed pursuant to an existing credit agreement with a group of banks 
(see HCAR No. 26488, March 12, 1996) to pay for the tendered Shares. 
Smith Barney, Inc. and Morgan Stanley & Co., Inc. will act as dealer 
managers for Cinergy in connection with the Tender Offer.\7\
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    \4\ The Proxy Solicitation and Tender Offer will be effectuated 
by means of the same core document: a combined proxy statement and 
issuer tender offer statement filed under the Securities Exchange 
Act of 1934 (``Exchange Act'') and the applicable rules and 
regulations thereunder. Applicants state that they will comply fully 
will all requirements of the Exchange Act and the rules and 
regulations thereunder applicable to the Proxy Solicitation and 
Tender Offer, and acknowledge that any Commission authorization 
granted under the Act is conditioned upon such compliance. 
Applicants also state that the Tender Offer will satisfy the 
requirements of rule 51 under the Act.
    \5\ The Offer Documents provided that, at any time or from time 
to time, Cinergy may extend the Expiration Date applicable to any 
Series, without extending the Expiration Date for any other Series, 
by giving notice of such extension to the Bank of New York, which 
will act as depositary (``Depositary''). During any such extension, 
all Shares of the applicable Series previously tendered will remain 
subject to the Tender Offer, and may be withdrawn at any time prior 
to the Expiration Date as extended. Conversely, Cinergy may elect in 
its sole discretion to terminate the Tender Offer prior to the 
scheduled Expiration Date and not accept for payment and pay for 
Shares tendered, subject to applicable provisions of rule 13e-4 
under the Exchange Act requiring Cinergy either to pay the 
consideration offered or to return the tendered Shares promptly 
after the termination or withdrawal of the Tender Offer, upon the 
occurrence of any of the conditions of closing enumerated in the 
Offer Documents, by giving notice of such termination to the 
Depositary and making a public announcement thereof. Subject to 
compliance with applicable law, Cinergy also reserves the right in 
the Offer Documents, in its sole discretion, to amend the Tender 
Offer in any respect by making a public announcement thereof. If 
Cinergy materially changes the terms of the Tender Offer or the 
information concerning the Tender Offer, or if it waives a material 
condition of the Tender Offer (such as the condition, mentioned 
below, that the Proposed Amendment be adopted at the Special 
Meeting), Cinergy will extend the Expiration Date to the extent 
required by the applicable provisions of rule 13e-4 under the 
Exchange Act.
    \6\ With respect to Shares validly tendered and accepted for 
payment by Cinergy, each tendering preferred stockholder will be 
entitled to receive as consideration from Cinergy only the 
applicable Purchase Price (which may reflect a premium over the 
current market price at the commencement of the Tender Offer). Any 
such holder will not be entitled to receive additional consideration 
in the form of a Cash Payment from CG&E with respect to such 
tendered Shares. The latter payment will be payable by CG&E solely 
in respect to Shares voted in favor of the Proposed Amendment by 
preferred stockholders at the Special Meeting, provided that (a) 
such Shares have not been tendered pursuant to the Tender Offer and 
(b) the Proposed Amendment is adopted at the Special Meeting. 
Preferred Stockholders who wish to tender their Shares pursuant to 
the Tender Offer are not required to vote in favor of the Proposed 
Amendment; however, the Tender Offer is conditioned upon the 
Proposed Amendment being adopted at the Special Meeting.
    \7\ Cinergy has agreed to pay the dealer managers a combined fee 
of $0.50 per Share for any Shares tendered, accepted for payment and 
paid for pursuant to the Tender Offer and to reimburse the dealer 
managers for their reasonable out-of-pocket expenses, including 
attorney's fees. In addition, Cinergy has agreed to pay soliciting 
brokers and dealers a separate fee of $1.50 per Share for any Shares 
tendered, accepted for payment and paid for pursuant to the Tender 
Offer (except that (a) in the case of transactions involving blocks 
of 5,000 or more tendered Shares, Cinergy will pay a solicitation 
fee of $1.25 per Share, and (b) soliciting brokers and dealers will 
not be entitled to any solicitation fee with respect to tendered 
Shares accepted for payment as to which they are the beneficial 
owners). Cinergy expects to pay the Bank of New York a depositary 
fee of approximately $22,000.

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[[Page 43797]]

    If the Proposed Amendment is adopted at the Special Meeting, 
promptly after consummation of the Tender Offer, Cinergy will make a 
capital contribution to CG&E of all Shares tendered to and acquired by 
Cinergy pursuant to the Tender Offer, and CG&E will thereupon retire 
and cancel such Shares.\8\ If the Proposed Amendment is not adopted at 
the Special Meeting, Cinergy, subject to applicable law, may elect, but 
is not obligated, to waive adoption of the Proposed amendment as a 
condition to its obligation to proceed with the Tender Offer. In that 
case, as promptly as practicable after Cinergy's waiver of such 
condition and its purchase of the Shares validly tendered pursuant to 
the Tender Offer, CG&E (after requesting and receiving any additional 
Commission authorizations required under the Act) anticipates that it 
would call another special meeting of its common and preferred 
stockholders to solicit proxies therefrom for the same purpose as the 
instant proceeding (i.e., to secure the requisite two-thirds 
affirmative vote of stockholders to amend the Articles to eliminate the 
20% Limitation). At that meeting, Cinergy would vote any Shares 
acquired by it pursuant to the Tender Offer or otherwise \9\ (as well 
as all of its shares of Common Stock) in favor of the Proposed 
Amendment. If the Proposed Amendment is adopted at that meeting, and in 
any event within one year of the Expiration Date (including any 
extension thereof), Cinergy will promptly after such meeting or at the 
expiration of such one-year period, as applicable, make a capital 
contribution to CG&E of all Shares held by Cinergy, and CG&E will 
thereupon retire and cancel such Shares.
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    \8\ Applicants state that the contemplated capital contribution 
by Cinergy to CG&E of Shares acquired by Cinergy pursuant to the 
Tender Offer would be exempt from the requirements of section 12(b) 
and rule 45(a) pursuant to rule 45(b)(4).
    \9\ Following the Expiration Date and the consummation of the 
purchase of Shares pursuant to the Tender Offer, Cinergy may decide 
to purchase additional Shares on the open market, in privately 
negotiated transactions, through one or more tender offers or 
otherwise. Applicants state that Cinergy will not undertake any such 
transactions without first receiving any additional Commission 
authorizations required under the Act.
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    It appears that the application-declaration, to the extent that it 
relates to the proposed Proxy Solicitation, should be granted and 
permitted to become effective forthwith pursuant to rule 62.
    It is ordered, therefore, that the application-declaration, to the 
extent that it relates to the proposed Proxy Solicitation be, and it 
hereby is, granted and permitted to become effective forthwith pursuant 
to rule 62 and subject to the terms and conditions prescribed in rule 
24 under the Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-21608 Filed 8-23-96; 8:45 am]
BILLING CODE 8010-01-M