Cinergy and Duke Energy Agree to Merge; Creates Energy Company With
$36 Billion Market Capitalization * Duke Energy dividend to be
increased 12.7 percent for an annual dividend of $1.24 * Combined
company to have more than $70 billion in total assets * All stock
transaction; each common share of Cinergy to be converted into 1.56
shares of Duke Energy * Duke Energy's Anderson to be chairman of
combined company; Cinergy's Rogers to be president and CEO
CHARLOTTE, N.C. and CINCINNATI, May 9 /PRNewswire/ -- Cinergy (CIN)
and Duke Energy (DUK) today announced they have entered into a
definitive merger agreement to create an energy company with
approximately $36 billion in market capitalization and 5.4 million
retail customers. The merger, which was unanimously approved by
both companies' boards of directors, will create a combined energy
company with assets totaling more than $70 billion. The combined
company, to be named Duke Energy Corporation, will have
approximately $27 billion in annual revenues and $1.9 billion in
annual net income (combined figures as of Dec. 31, 2004). It will
own and/or operate approximately 54,000 megawatts of electric
generation domestically and internationally -- relying on a diverse
fuel mix of nuclear, coal, natural gas and hydroelectric power to
meet customers' needs. Duke Energy also operates more than 17,500
miles of natural gas transmission pipeline with 250 billion cubic
feet of natural gas storage capacity and, through its joint venture
with ConocoPhillips, is the largest producer of natural gas liquids
(NGLs) in North America. The combined company will have operations
in two-thirds of the United States, as well as Canada and several
other international locations -- primarily in Latin America. By
combining resources and best practices, the merger will enhance
operations and create efficiencies at all levels of the new
company, including generation, transmission and distribution as
well as power and gas marketing. Under the merger agreement, each
common share of Cinergy will be converted into 1.56 shares of Duke
Energy upon closing of the merger. Based on the closing prices on
May 6, Cinergy investors will receive a premium of 13.4 percent.
Following the merger, Cinergy shareholders will own approximately
24 percent, or about 310 million shares, of Duke Energy pro-forma
shares outstanding, and Duke Energy shareholders will own
approximately 76 percent of the total 1.3 billion shares. The
transaction will be accretive to Duke Energy's earnings in the
first full year of operation. Upon completion of the merger, Paul
M. Anderson, currently chairman and chief executive officer of Duke
Energy, will become chairman of the board of the combined company.
James E. Rogers, currently chairman, president and chief executive
officer of Cinergy, will become president and chief executive
officer. The new board will be comprised initially of 10 members
named by Duke Energy and five members named by Cinergy. "The
combination of Duke Energy and Cinergy will create a rock-solid
portfolio of electric and gas businesses, increasing value for our
shareholders immediately and in the longer term," said Anderson.
"This union is a great strategic fit and leaves us well positioned
for continued consolidation in the energy sector as both the
electric and gas businesses will have the scale to stand alone.
Importantly, it also provides an immediate and significant
improvement for our merchant operations and enhances their future
prospects. "Just as significant as the strong strategic fit of our
companies is the cultural fit. Duke Energy and Cinergy share
compatible values, operating philosophies and views of the future,"
Anderson said. "The increased scope and scale will make the
combined company a major industry leader with a strong balance
sheet, complementary assets and a low- cost generation portfolio,"
said Rogers. "Both companies are known for operational excellence
as well as strong customer service and reliability. "We are
creating a top-tier energy company that will assume a key
leadership role in the future of our industry while delivering
benefits to all of our stakeholders. Moreover, this combination
creates a stronger platform from which to continue our leadership
in finding practical solutions to the environmental challenges
facing our industry and country." Benefits of the Merger The merger
will deliver significant value to customers and shareholders of
both companies: Increased Scale and Scope of Regulated Businesses:
The combined company will create a stronger portfolio of utility
businesses with 3.7 million retail electric customers and 1.7
million retail gas customers in Ohio, Kentucky, Indiana, North
Carolina, South Carolina and Ontario, Canada. The retail electric
businesses will have more than 25,000 megawatts of generation and
broad operational and regulatory experience. Coupled with the
company's pipeline operations, the regulated businesses will
contribute a substantial percentage of stable earnings and create
the financial strength and scale to participate in the continuing
consolidation of the utility sector. Stronger Merchant Power
Platform: With a fleet of more than 16,000 megawatts of unregulated
generation, the combined merchant power operation will benefit from
increased fuel and market diversity. Consolidation of the trading
and marketing units and midwestern merchant generating fleets will
enhance scale and efficiencies -- reducing the cost structure of
merchant operations by approximately $95 million during year one
and $125 million per year subsequently. Significantly, Duke
Energy's gas-fired generation in the Midwest complements Cinergy's
coal-fired generation in that region. The merchant operations, with
a competitive market presence in North America and South America,
will be well positioned to participate in the continuing
consolidation of the wholesale power sector. Increased Duke Energy
Dividend Creates Immediate Shareholder Value: In conjunction with
today's merger announcement, Duke Energy's board of directors said
it intends to increase Duke Energy's dividend by 12.7 percent, or
14 cents a year, for an annual dividend of $1.24. The dividend
increase, which will be voted on during the board's June meeting,
would be effective with the September 2005 disbursement. As a
result of the merger transaction and the Duke Energy dividend
increase, Cinergy shareholders will be kept whole at closing with
respect to their current dividend. Continued Financial Strength:
Increased scale and scope will also strengthen the balance sheet of
the combined company, improving financial flexibility and
positioning it well for the future. The combined company will have
electric and gas businesses with stand-alone scale. Based on
implied market capitalization, the electric business would be one
of the top five in the United States; the gas business would be the
largest in North America. Significant Synergies: The merger offers
both strategic and financial advantages in serving the energy
marketplace. Not including implementation costs, the combination
will generate approximately $400 million in annual gross synergies
-- when fully realized in year three -- from across corporate
activities, regulated utilities and non-regulated marketing,
trading and generation businesses. These cost savings will result
from elimination of duplicate spending and overlapping functions,
improved sourcing strategies, avoidance of planned expenditures and
the consolidation of non-regulated business unit operations. The
combined companies currently employ approximately 29,350 and expect
a reduction of approximately 1,500, primarily through attrition,
early retirements and other severance programs. The companies
anticipate that upon review with state commissions, regulated
savings will be shared between customers and shareholders over time
in an equitable manner. Steadfast Community Involvement: Duke
Energy and Cinergy have long been committed to the communities in
which they operate. That demonstrated commitment will continue
through local presence, economic development efforts and corporate
contributions. Structure and Organization Following the merger, the
combined company will be a registered holding company with
corporate headquarters in Charlotte, N.C. Local headquarters of the
operating utilities will remain unchanged by the merger: Cincinnati
Gas & Electric Company and Union Light, Heat & Power will
remain in Cincinnati; PSI Energy will remain in Plainfield,
Indiana; and Duke Power will continue to be headquartered in
Charlotte. Duke Energy Gas Transmission (DEGT) and certain
commercial operations will remain in Houston. Duke Energy Field
Services (DEFS) will remain headquartered in Denver and Crescent
Resources will continue to be located in Charlotte. At the
completion of the merger, Rogers will have responsibility for all
Duke Energy's business units, corporate functions and support
services with the exception of the company's gas businesses: DEGT
and DEFS. At closing, Fred Fowler, currently president of Duke
Energy, will become president and chief executive officer of these
gas operations, reporting to Rogers on operations and to Anderson
on strategy, pending completion of a strategic review of the
portfolio. Approvals and Timing The merger is conditioned upon
approval by the shareholders of both companies, as well as a number
of regulatory approvals or reviews by federal and state energy
authorities, including the North Carolina Utilities Commission, the
Public Service Commission of South Carolina, the Public Utilities
Commission of Ohio, the Kentucky Public Service Commission, the
Indiana Utility Regulatory Commission, the Federal Energy
Regulatory Commission (FERC), the Nuclear Regulatory Commission
(for assurance of continuing financial qualifications and
operational standards), the Securities and Exchange Commission
(SEC) and the Department of Justice. The new company intends to
register as a holding company with SEC under the Public Utility
Holding Company Act. The companies anticipate making required
regulatory filings by July 2005, with necessary approvals obtained
in about 12 months. The companies will work to secure necessary
government approvals consistent with FERC's Merger Policy Statement
and the Hart-Scott- Rodino Antitrust Improvements Act. Analyst and
Media Webcast Information Analyst Presentation: Duke Energy and
Cinergy will host a conference call and webcast for the investment
community today at 10:30 a.m. EDT, in the Versailles room of the
St. Regis Hotel at 2 East 55th Street and Fifth Avenue in New York,
N.Y. The conference call can be accessed via the investors' section
of both companies at: http://www.duke-energy.com/ and
http://www.cinergy.com/ or by dialing 888/578-6632 in the United
States or 719/955-1565 outside the United States. The confirmation
code is 6483076. Please call in five to 10 minutes prior to the
scheduled start time. A replay of the conference call will be
available until May 18, 2005, midnight EDT, by dialing 888/203-1112
with a confirmation code of 6483076. The international replay
number is 719/457-0820 with a confirmation code of 6483076. A
replay and transcript also will be available by accessing the
investors' section of each company's Web site. Media Availability:
Duke Energy and Cinergy will also host a separate conference call
for members of the media today at 1:30 p.m. EDT. Dial-in numbers
for the media are: 800/946-0713 in the United States or
719/457-2642 outside the United States. The confirmation code is
8894744. Please call in five to 10 minutes prior to the scheduled
start time. More Merger Information Merger Fact Sheet:
http://www.duke-energy.com/company/aboutus/merger/merger_factsheet.pdf
Combined Company's North American Asset Map:
http://www.duke-energy.com/company/aboutus/merger/map.asp Advisors
Duke Energy's financial advisor was UBS Investment Bank and the
company also received a fairness opinion from Lazard Ltd. Cinergy
was advised by and received a fairness opinion from Merrill Lynch
and Co. Legal counsel to Duke Energy was Skadden, Arps, Slate,
Meagher and Flom LLP; and Cinergy's legal counsel was Wachtell,
Lipton, Rosen & Katz. Corporate Profiles Cinergy has a
balanced, integrated portfolio consisting of two core businesses:
regulated operations and commercial businesses. Cinergy's
integrated businesses make it a Midwest leader in providing both
low-cost generation and reliable electric and gas service. More
information about the company is available on the Internet at:
http://www.cinergy.com/ . Duke Energy is a diversified energy
company with a portfolio of natural gas and electric businesses,
both regulated and unregulated, and an affiliated real estate
company. Duke Energy supplies, delivers and processes energy for
customers in the Americas. Headquartered in Charlotte, N.C., Duke
Energy is a Fortune 500 company traded on the New York Stock
Exchange under the symbol DUK. More information about the company
is available on the Internet at: http://www.duke-energy.com/ .
Forward-Looking Statement This document includes statements that do
not directly or exclusively relate to historical facts. Such
statements are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements
include statements regarding benefits of the proposed mergers and
Restructuring Transactions, integration plans and expected
synergies, anticipated future financial operating performance and
results, including estimates of growth. These statements are based
on the current expectations of management of Duke Energy and
Cinergy. There are a number of risks and uncertainties that could
cause actual results to differ materially from the forward-looking
statements included in this document. For example, (1) the
companies may be unable to obtain shareholder approvals required
for the transaction; (2) the companies may be unable to obtain
regulatory approvals required for the transaction, or required
regulatory approvals may delay the transaction or result in the
imposition of conditions that could have a material adverse effect
on the combined company or cause the companies to abandon the
transaction; (3) conditions to the closing of the mergers and the
restructuring transactions may not be satisfied; (4) problems may
arise in successfully integrating the businesses of the companies,
which may result in the combined company not operating as
effectively and efficiently as expected; (5) the combined company
may be unable to achieve cost-cutting synergies or it may take
longer than expected to achieve those synergies; (6) the
transaction may involve unexpected costs or unexpected liabilities,
or the effects of purchase accounting may be different from the
companies' expectations; (7) the credit ratings of the combined
company or its subsidiaries may be different from what the
companies expect; (8) the businesses of the companies may suffer as
a result of uncertainty surrounding the transaction; (9) the
industry may be subject to future regulatory or legislative actions
that could adversely affect the companies; and (10) the companies
may be adversely affected by other economic, business, and/or
competitive factors. Additional factors that may affect the future
results of Duke Energy and Cinergy are set forth in their
respective filings with the Securities and Exchange Commission
("SEC"), which are available at
http://www.duke-energy.com/investors and
http://www.cinergy.com/investors, respectively. Duke Energy and
Cinergy undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Additional Information and Where to
Find It In connection with the proposed transaction, a registration
statement of Deer Holding Corp., which will include a joint proxy
statement of Duke Energy and Cinergy, and other materials, will be
filed with SEC. WE URGE INVESTORS TO READ THE REGISTRATION
STATEMENT AND PROXY STATEMENT AND THESE OTHER MATERIALS CAREFULLY
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT DUKE ENERGY, CINERGY, DEER HOLDING CORP., AND THE
PROPOSED TRANSACTION. Investors will be able to obtain free copies
of the registration statement and proxy statement (when available)
as well as other filed documents containing information about Duke
Energy and Cinergy at http://www.sec.gov/, SEC's Web site. Free
copies of Duke Energy's SEC filings are also available on Duke
Energy's Web site at http://www.duke-energy.com/investors and free
copies of Cinergy's SEC filings are also available on Cinergy's Web
site at http://www.cinergy.com/investors . Participants in the
Solicitation Duke Energy, Cinergy and their respective executive
officers and directors may be deemed, under SEC rules, to be
participants in the solicitation of proxies from Duke Energy's or
Cinergy's stockholders with respect to the proposed transaction.
Information regarding the officers and directors of Duke Energy is
included in its definitive proxy statement for its 2005 annual
meeting filed with SEC on March 31, 2005. Information regarding the
officers and directors of Cinergy is included in its definitive
proxy statement for its 2005 annual meeting filed with SEC on March
28, 2005. More detailed information regarding the identity of
potential participants, and their direct or indirect interests, by
securities, holdings or otherwise, will be set forth in the
registration statement and proxy statement and other materials to
be filed with SEC in connection with the proposed transaction.
http://www.newscom.com/cgi-bin/prnh/20040414/DUKEENERGYLOGO
http://photoarchive.ap.org/ DATASOURCE: Duke Energy CONTACT: Media,
Pete Sheffield, Phone: +1-980-373-4503, 24-Hour: +1-704-382-8333,
or Analyst, Julie Dill, Cell: +1-704-307-9035, Phone:
+1-980-373-4332, both of Duke Energy; Media, Steve Brash, Phone:
+1-513-287-2226, or Analyst, Brad Arnett, Phone: +1-513-287-3024,
both of Cinergy Web site: http://www.duke-energy.com/
http://www.cinergy.com/investors Company News On-Call:
http://www.prnewswire.com/comp/257451.html
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