El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
El Paso Energy Corporation and Sonat Inc. Announce Merger Agreement
Houston, Texas, March 15, 1999-El Paso Energy Corporation (NYSE:EPG) and Sonat
Inc. (NYSE:SNT) announced today the execution of definitive agreements for the merger of
El Paso Energy and Sonat. The total value of the transaction is approximately $6
billion, including $2 billion of assumed Sonat debt. In the merger, each Sonat share will
be converted into one share of El Paso Energy common stock. It is expected that the
merger will be completed during the third or fourth quarter of 1999. The total enterprise
value of the combined company, based on El Paso's closing price on Friday, would
exceed $14 billion.
"The merger between El Paso and Sonat will create the preeminent natural gas
company in North America. The combined company will rank among the leaders in all key
sectors of our industry including interstate transmission, intrastate transmission, gas
gathering and processing, energy marketing and power development," said William A.
Wise, chairman, president and chief executive officer of El Paso Energy. "Our
combined interstate transmission systems alone will consist of an impressive 40,000 miles
of pipeline reaching all the major growth areas in the country and moving more gas than
any other U.S. company-nearly a quarter of all the natural gas transported in the
U.S. every day."
"Both El Paso and Sonat are dynamic organizations that complement each other
operationally and geographically. Our merged interstate pipeline systems will stretch from
Bakersfield to Birmingham and Brownsville to Boston. They will tap the most prolific
supply basins in North America and access the largest and fastest growing natural gas
markets in the United States, including Florida and other key southeastern states. New
gas-fueled power generation development is particularly active in these areas. Our ability
to access these new markets will further diversify our market base and allow us to employ
our combined expertise in energy marketing and power generation."
"The transaction will also provide exciting opportunities for our El Paso
Field Services business unit. Sonat Exploration has a substantial oil and gas exploration
and production base that spans the southern United States from Texas to Alabama, including
an important presence in the Gulf of Mexico. Our onshore gathering and processing
facilities and Leviathan Gas Pipeline's offshore gathering operations will provide
Sonat Exploration's existing 1.6 trillion cubic feet of natural gas equivalent
reserves access to burgeoning power generation markets and the best interstate pipeline
network in the U.S."
"This merger is consistent with our ongoing strategy of maintaining future growth
through seeking significant acquisitions and mergers within our industry. Three years ago
we purchased Tenneco Energy in what has come to be regarded as the most successful merger
within the pipeline industry. We expect to realize similar benefits from the combination
with Sonat. The merger will be earnings and cash flow accretive in the year 2000, the
first full year of operations, and beyond," Mr. Wise added.
Ronald L. Kuehn, Jr., chairman, president and chief executive officer of Sonat said,
"This is clearly an excellent transaction for our shareholders and customers. We are
creating a company with exceptional natural gas and electric opportunities across the
United States and literally around the world."
The combined company will retain the El Paso Energy name and be headquartered in
Houston, Texas. Sonat is currently headquartered in Birmingham, Alabama, and the
headquarters of Sonat's interstate pipeline, Southern Natural Gas Company, will
remain in Birmingham. William A. Wise, the current chairman, president and chief executive
officer of El Paso Energy, will continue as president and chief executive officer of
the new company. Ronald L. Kuehn, Jr., who is currently the chairman, president, and chief
executive officer of Sonat, will become the non-executive chairman of the board for the
combined company until December 31, 2000. The Board of Directors for the combined company
will consist of 15 directors-nine who will be designated by El Paso and six who
will be designated by Sonat.
The merger is subject to customary conditions, including approval by the stockholders
of Sonat and receipt of certain required governmental approvals. In order to provide Sonat
stockholders greater certainty that the transaction will be completed, El Paso Energy
has agreed that if El Paso stockholder approval for the common issuance were not
obtained, El Paso would issue 19.9 percent of its outstanding common stock as merger
consideration, with the balance of the merger consideration paid in the form of
non-convertible, long-term preferred stock.
The merger agreement includes customary non-solicitation, termination fee and expense
reimbursement provisions. In addition, each of the companies has granted the other an
option to purchase up to 19.9 percent of its outstanding common stock, exercisable if the
merger is terminated under certain circumstances. Members of the Zilkha family, who own
approximately 21 percent of the outstanding Sonat shares, have agreed to vote their shares
in favor of the merger.
Donaldson, Lufkin and Jenrette Securities Corporation is acting as El Paso's
financial advisor for the transaction, while Merrill Lynch Corporation is advisor to
Sonat. The law firm of Fried, Frank, Harris, Shriver & Jacobson is El Paso's
legal advisor, and Sonat is represented by the law firm of Wachtel, Lipton, Rosen &
With over $10 billion in assets, El Paso Energy Corporation provides energy
solutions through five business units: Tennessee Gas Pipeline Company, El Paso
Natural Gas Company, El Paso Field Services Company, El Paso Energy Marketing
Company, and El Paso Energy International Company. The company owns the nation's
only integrated coast-to-coast natural gas pipeline system and has operations in natural
gas transmission, gas gathering and processing, energy marketing, power generation and
international energy infrastructure development.
Sonat Inc., headquartered in Birmingham, is a diversified energy company engaged in
exploration and production of oil and natural gas, interstate transmission of natural gas,
and energy services. Visit Sonat's web site at www.sonat.com.
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El Paso Energy Inc./Sonat Combined Assets
Sonat Inc. Media and Investor Relations Contact
This release includes forward-looking statements and projections, made in
reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The companies have made every reasonable effort to ensure that the information and
assumptions on which these statements and projections are based are current, reasonable,
and complete. However, a variety of factors could cause actual results to differ
materially from the projections, anticipated results or other expectations expressed in
this release. While the companies make these statements and projections in good faith,
neither the companies nor their managements can guarantee that the anticipated future
results will be achieved. Reference should be made to the companies' (and their
affiliates') Securities and Exchange Commission filings for additional important
factors that may affect actual results.