[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] ----------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- [[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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- [[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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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