FORM 8-K
CURRENT REPORT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) DECEMBER 22, 2002
COMMISSION REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
----------- ----------------------------------- ------------------
1-9513 CMS ENERGY CORPORATION 38-2726431
(A MICHIGAN CORPORATION)
FAIRLANE PLAZA SOUTH, SUITE 1100
330 TOWN CENTER DRIVE
DEARBORN, MICHIGAN 48126
(313) 436-9261
1-2921 PANHANDLE EASTERN PIPE LINE 44-0382470
COMPANY
(A DELAWARE CORPORATION)
5444 WESTHEIMER ROAD, P.O. BOX 4967
HOUSTON, TEXAS 77210-4967
(713) 989-7000
ITEM 5. OTHER EVENTS
On December 22, 2002, CMS Energy Corporation ("CMS Energy") announced that CMS
Gas Transmission Company ("Seller"), a wholly-owned indirect subsidiary of CMS
Energy, has entered into a definitive Stock Purchase Agreement, dated as of
December 21, 2002, (the "Agreement") with Southern Union Panhandle Corp.
("Buyer"), AIG Highstar Capital, L.P. ("Highstar"), AIG Highstar II Funding
Corp. ("Funding") and the Southern Union Company ("Southern" and collectively
with Highstar and Funding, the "Sponsors"), to sell all the outstanding
capital stock of Panhandle Eastern Pipe Line Company ("Panhandle") and its
subsidiaries, including CMS Trunkline Gas Company, CMS Trunkline LNG Company,
which operates an LNG terminal complex at Lake Charles, Louisiana, CMS
Panhandle Gas Storage, LLC and CMS Sea Robin Pipeline Company (these companies
together with certain other subsidiaries are hereinafter referred to as the
"Panhandle Companies"). The Sponsors have formed Buyer for purposes of
effecting the transactions contemplated in the Agreement. Under the terms of
the Agreement, CMS Energy will retain its indirect ownership interest in the
Centennial refined petroleum liquids pipeline, which stretches from Texas to
Illinois, and the Guardian natural gas pipeline, which serves northern
Illinois and southern Wisconsin. CMS Energy indirectly owns a one-third
interest in each and is exploring the sale of those interests.
The purchase price for the stock of the Panhandle Companies is $662 million in
cash, subject to adjustment as provided in the Agreement. The Panhandle
Companies are expected to have approximately $1.166 billion of debt outstanding
at the time of closing which will be assumed by the Buyer. Under the terms of
the Agreement, the Sponsors, severally, shall cause the Buyer to perform all of
its obligations under the Agreement which are required to be performed on or
prior to the closing, including, without limitation, Buyer's requirement to
consummate the transactions and to pay the purchase price, including any
post-closing adjustment thereto.
As previously disclosed, Panhandle plans to take a significant goodwill
impairment in 2002. Any difference between the approximate $2.4 billion
present book value of the Panhandle assets being sold and the sale price of
$1.828 billion that is not accounted for as goodwill impairment, will be
included in discontinued operations in the fourth quarter of 2002. CMS Energy
intends to use the proceeds from the sale of the Panhandle Companies to
accelerate debt reduction.
The transactions have been approved by the Board of Directors of each party to
the Agreement. The Board of Directors of CMS Energy has received separate
opinions, dated the date of the Agreement, from each of Merrill Lynch & Co. and
Salomon Smith Barney Inc. to the effect that, subject to, and based upon the
assumptions, qualifications and limitations included in such opinions, the
consideration to be received by CMS Energy pursuant to the Agreement is fair
from a financial point of view to CMS Energy.
The transactions are subject to the satisfaction or waiver of certain conditions
to closing including, without limitation, (i) the receipt of all necessary
governmental approvals and the making of all governmental filings, including the
consent or approval of certain state regulatory authorities, (ii) 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 or termination of the applicable waiting period
thereunder, (iii) the receipt of certain approvals, consents, releases and legal
and financial opinions and (iv) the filing with the Securities and Exchange
Commission ("SEC") of restated financial statements of Panhandle for each of the
fiscal years ended December 31, 2000 and December 31, 2001 (the "Annual
Financial Statements") and the restated unaudited financial statements of
Panhandle for the quarters ended March 31, 2002, June 30, 2002 and September 30,
2002 (collectively, the "Restated Financials") which, except as otherwise
described to the Buyer, shall correspond in all material respects to the draft
Restated Financials delivered to Buyer prior to the date of the Agreement, and
any footnotes with respect to such restated quarterly financial statements shall
be the same in all material respects as such footnotes in the corresponding
quarterly financial statements for Panhandle filed with the SEC, except for
corresponding changes reflected in the Annual Financial Statements.
The Agreement may be terminated under certain circumstances, including (i) by
mutual consent, (ii) by either Seller or Buyer if the closing of the
transactions have not occurred on or before June 30, 2003 (the "Termination
Date"), provided, that if the requisite regulatory approvals have been obtained
as of such date and certain other conditions shall not have been fulfilled but
are reasonably capable of being fulfilled no later than ten business days
thereafter, the Termination Date shall be extended to July 15, 2003, (iii) by
either Seller or Buyer if any mutual condition to closing shall have become
incapable of fulfillment prior to the Termination Date, as such date may be
extended, (iv) by Seller, so long as it is not then in breach of any of its
obligations under the Agreement, if either Buyer or any of the Sponsors has
breached the Agreement and the closing condition regarding the accuracy of
representations and warranties or compliance with
covenants is incapable of being cured prior to the Termination Date, as such
date may be extended, (v) by Buyer, so long as it is not then in breach of any
of its obligations under the Agreement, if Seller has breached the Agreement and
the closing condition regarding the accuracy of representations and warranties
or compliance with covenants is incapable of being cured prior to the
Termination Date, as such date may be extended, and (vi) by Seller or Buyer, if
a governmental authority issues a final order or adopts a law restraining or
prohibiting the transactions contemplated in the Agreement.
If the closing of the transactions does not occur on or prior to March 31, 2003,
a delay penalty (the "Delay Penalty") shall begin accruing on a daily basis on
April 1, 2003 and shall continue until the earlier to occur of the closing of
the transaction or the termination of the Agreement. Southern Union shall pay
the Delay Penalty to Seller which shall be calculated as follows: $100,000 per
day in April, 2003; $200,000 per day in May, 2003 and $300,000 per day on and
after June 1, 2003. The Delay penalty shall be retained by Seller whether or not
the closing occurs, provided 25% of the Delay Penalty shall be credited towards
Buyer's payment of the purchase price at closing.
The Agreement includes a post-closing indemnity period during which Seller and
Buyer shall indemnify the other and their affiliates for damages arising from
breaches of representations and warranties, covenants and, in the case of
Seller, certain other scheduled matters. The survival period for representations
and warranties generally is one year from the date of the Agreement, however
representations and warranties with respect to environmental and tax matters
survive for two years and for a period equal to the applicable statute of
limitations, respectively. Neither Seller nor Buyer shall be required to
indemnify the other for breaches of representations and warranties, other than
with respect to taxes, unless the aggregate amount of any single breach or
series of related breaches results in damages exceeding $1,000,000 and the
aggregate amount of all such damages exceed $40,000,000, in which case only
damages in excess of such amount shall be indemnified. The indemnification
obligations of both Buyer and Seller with respect to breaches of representations
and warranties, other than with respect to taxes, are capped at $200,000,000.
For purposes of determining the existence of a breach of a representation and
warranty and calculation of the amount of damages resulting from a breach, no
effect shall be given to any materiality or material adverse effect
qualifications of such representation or warranty.
The Agreement and the press release issued in connection therewith are filed
herewith as Exhibits 10.1 and 99.1, respectively, and are incorporated herein by
reference. The foregoing description of the Agreement does not purport to be
complete and is qualified in its entirety by the provisions of the Stock
Purchase Agreement.
ITEM 7. EXHIBITS.
10.1 Stock Purchase Agreement by and among CMS Gas Transmission Company, AIG
Highstar Capital, L.P., AIG Highstar II Funding Corp., Southern Union
Company and Southern Union Panhandle Corp. dated as of December 21,
2002.
99.1 Press Release of CMS Energy Corporation dated December 22, 2002.
The Press Release contains "forward-looking statements", within the meaning of
the safe harbor provisions of the federal securities laws. The "forward-looking
statements" are subject to risks and uncertainties. They should be read in
conjunction with the "Forward-Looking Statement Cautionary Factors" in CMS
Energy's Form 10-K, Item 1 (incorporated herein by reference) that discuss
important factors that could cause CMS Energy's results to differ materially
from those anticipated in such statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
CMS ENERGY CORPORATION
Dated: December 23, 2002
By: /s/ S. Kinnie Smith, Jr.
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S. Kinnie Smith, Jr.
Vice Chairman and General Counsel
PANHANDLE EASTERN PIPE LINE
COMPANY
Dated: December 23, 2002
By: /s/ William J. Haener
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William J. Haener
Chairman of the Board