SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date: April 22, 2002
NATIONAL GRID GROUP plc
(Registrant's Name)
15 Marylebone Road
London
NW1 5JD
(Registrant's Address)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
X Form 20-F Form 40-F
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3- 2(b) under the
Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.
NATIONAL GRID GROUP plc
S/David C. Forward
By_________________________
Name: David C. Forward
Title: Assistant Secretary
Date: April 22, 2002
Part 1
EMBARGOED UNTIL 7:00 A.M. 22 April 2002
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR
INTO CANADA, AUSTRALIA OR JAPAN
MERGER OF NATIONAL GRID AND LATTICE TO CREATE A LEADING INTERNATIONAL
ENERGY DELIVERY COMPANY
The directors of National Grid and Lattice announce that they have
unanimously agreed the terms of a recommended merger of equals to form
National Grid Transco.
National Grid Transco will:
- be a leading international energy delivery company combining two
groups, each of which has a proven track record of operating
complex energy networks safely and reliably within incentive based
regulatory environments;
- utilise the complementary skills of the two groups to maximise
shareholder value from its existing UK and US assets through
enhanced operating performance and the sharing of best practice;
- offer an enhanced operational and financial platform for future
growth in the liberalising energy markets;
- have a combined market capitalisation of approximately 14.8 billion
pounds sterling (based on the National Grid Closing Price and the
Lattice Closing Price on 19 April 2002) and become the UK's largest
utility.
The Merger will:
- generate pre-tax financial benefits that are expected to reach an
annualised rate of at least 100 million pounds sterling by the end
of the first full financial year following completion of the
Merger. The directors of National Grid and Lattice believe that
these financial benefits will arise principally from the
elimination of duplicate head office costs and other central cost
savings and from combining the support services provided to the UK
regulated electricity and gas businesses;
- generate further savings from the progressive combination of the
operations of the two UK transmission businesses, sharing best
practice between the US and UK businesses and further financial
synergies;
- create a combined group with significant balance sheet strength and
strong operational cash flows. The Merged Group will seek to
maintain a single A credit rating.
National Grid Transco Shareholders will benefit from:
- enhanced earnings per share (pre-exceptional items) in the first
full financial year following completion of the Merger; (1)
- a progressive dividend policy. The Merged Group intends to adopt
National Grid's existing dividend policy of aiming to increase
dividends per share by 5 per cent. in real terms per annum for
each year to 31 March 2006;
- the Merged Group taking advantage of opportunities presented by
the liberalising international energy markets, in particular by
building upon National Grid's successful US strategy.
The terms of the Merger are based on the recent relative equity market
capitalisations of the two companies. Under the terms of the Merger,
National Grid Shareholders will retain their shares in National Grid (to
be renamed National Grid Transco) and Lattice Shareholders will receive
0.375 New National Grid Transco Shares for each Lattice Share. Upon
completion of the Merger, National Grid Shareholders will hold
approximately 57.3 per cent. and Lattice Shareholders will hold
approximately 42.7 per cent. of the issued share capital of National
Grid Transco, based on the current issued share capital of the two
companies.
Lattice Shareholders will remain entitled to receive Lattice's second
interim dividend of 5.4 pence per Lattice Share to be paid on 14 June
2002. National Grid Shareholders will have the right to receive the
National Grid Final Dividend of 9.58 pence per National Grid Share to be
paid on 15 August 2002. New National Grid Transco Shares, issued
pursuant to the Merger, will rank pari passu with the existing National
Grid Shares save that they will not be entitled to receive the National
Grid Final Dividend.
The Board of National Grid Transco will be drawn from the boards of
National Grid and Lattice. Sir John Parker will be Non-Executive
Chairman. James Ross will be Non-Executive Deputy Chairman. Roger Urwin
----------
(1) The statement that the Merger will be earnings per share enhancing
for National Grid and Lattice should not, however, be interpreted to
mean that earnings per share in the first full financial year following
the Merger, or in any subsequent period, will necessarily be greater
than those for the relevant preceding financial period.
will be Group Chief Executive and Steve Lucas will be Group Finance
Director. The remaining executive directors, drawn from National Grid
and Lattice, will be Edward Astle, Steve Holliday, Colin Matthews, Rick
Sergel and John Wybrew. Stephen Box, National Grid Finance Director,
will take early retirement on the grounds of ill-health upon the
completion of the Merger.
The Merger is intended to be implemented by way of a scheme of
arrangement between Lattice and its shareholders under section 425 of
the Companies Act. The Merger is subject to a number of conditions,
including regulatory consents and approvals in the UK and the US, the
sanction of the Court and the approval of the shareholders of both
National Grid and Lattice. The Merger is expected to complete during
the autumn of 2002.
Commenting on today's announcement, James Ross, Chairman of National
Grid, said:
"This merger is born of complementarity, proven skills and a clear,
mutually shared recognition of how National Grid and Lattice together
will create greater value for all stakeholders. National Grid Transco
will be a truly world class energy delivery company."
Commenting on today's announcement, Sir John Parker, Chairman and acting
Chief Executive of Lattice, said:
"The combination of Lattice and National Grid will create a leading
international energy company with significant cost saving and synergy
potential. The Merger creates a platform for growth which will allow
National Grid Transco to realise significant value for shareholders."
Commenting on today's announcement, Roger Urwin, Chief Executive of
National Grid, said:
"The fit of skills, experience and resources of National Grid and
Lattice are as near perfect as you can find. We will build upon the
records of both companies to drive further improvements in operating
performance in both our UK and US businesses. We shall also deploy the
combined resources and financial capacity of National Grid Transco to
take advantage of opportunities in the liberalising energy markets
abroad, in particular extending National Grid's successful US strategy."
Rothschild is acting as financial adviser to National Grid and Credit
Suisse First Boston and Merrill Lynch are acting as joint corporate
brokers. JPMorgan and Cazenove are acting as joint financial advisers
to Lattice and Hoare Govett and Cazenove are acting as joint corporate
brokers.
This summary should be read in conjunction with the full text of the
following announcement. Appendix 4 contains the definitions of certain
terms used in this announcement.
There will be a presentation to analysts at 9:30 a.m. today at JPMorgan,
10 Aldermanbury, London, EC2V 7RF, and a press conference at 11:30 a.m.
at the same address.
Should analysts be unable to attend the analysts' presentation in
person, there will be a dial in facility available. Details of this
facility will be distributed by the Investor Relations department of the
respective companies.
The analysts' presentation will have a replay facility available from
2:00 p.m. today until close of business on Friday 17 May, which can be
accessed as follows:
From the UK Dial in = 020 8288 4459, Access code = 649 542
From the US Dial in = 303 804 1855, Access code = 1 775 666
A webcast of the analyst presentation will be available later today on
both companies' websites at:
www.nationalgrid.com
www.lattice-group.com
There will also be a teleconference, followed by a Q and A session, for
UK and US institutions at 2:00 p.m. UK time (9:00 a.m. EST). Details of
the teleconference will be distributed by the Investor Relations
department of the respective companies.
The teleconference will have a replay facility from 5:00 p.m. today
until close of business on Friday 17 May, which can be accessed as
follows:
From the UK Dial in = 020 8288 4459, Access code = 649 552
A US replay number will be available from the Investor Relations
department of the respective companies.
All other enquires should be made to the following:
National Grid Lattice
(011) 44 207 312 5781 (011) 207 389 3200
Roger Urwin Sir John Parker
Stephen Box Steve Lucas
Investor Relations Investor Relations
Marcy Reed 44 207 312 5779 Melissa Sellars 44 207 389 3219
Terry McCormick 44 207 312 5785 Gary Rawlinson 44 207 389 3218
Louise Clamp 44 207 312 5783
Media Relations Media Relations
Clive Hawkins 44 207 312 5757 Gillian Home 44 207 389 3212
Jim Willison 44 207 389 3213
Rothschild 44 207 280 5000 JP Morgan 44 207 325 8431
Nicholas Wrigley Robert McGuire
James Douglas-Hamilton Jeremy Wilson
Cazenove 44 207 588 2828
Nick Wiles
Patrick Magee
Citigate Dewe Rogerson The Maitland Consultancy
Anthony Carlisle 44 207 638 9571 Angus Maitland 44 207 379 5151
44 797 361 1888 44 778 526 8283
Photographs will be available on www.newscast.com
This announcement does not constitute an offer to sell or invitation to
purchase any securities or the solicitation of any vote or approval in
any jurisdiction.
This announcement has been issued by National Grid and Lattice and is
the responsibility of National Grid and Lattice and has been approved
solely for the purposes of section 21 of the Financial Services and
Markets Act 2000 by N M Rothschild and Sons Limited of New Court, St
Swithin's Lane, London, EC4P 4DU; J.P. Morgan plc of 125 London Wall,
London, EC2Y 5AJ; and Cazenove and Co. Ltd of 12 Tokenhouse Yard,
London, EC2R 7AN.
The directors of National Grid and the directors of Lattice jointly
accept responsibility for the information contained in this announcement
other than the information relating solely to National Grid or Lattice
and their respective subsidiaries, associates, shareholders and
directors, for which the directors of National Grid and Lattice
respectively accept such responsibility. To the best of the knowledge,
information and belief of such directors (who have taken all reasonable
care to ensure that such is the case), the information contained in this
announcement for which they accept responsibility is in accordance with
the facts and does not omit anything likely to affect the import of such
information.
National Grid and Lattice have been advised that the New National Grid
Transco Shares to be issued under the Scheme are exempt from the
registration requirements of the US Securities Act of 1933, as amended
and, as a consequence, the New National Grid Transco Shares to be issued
under the Scheme will not be registered thereunder.
Rothschild is acting exclusively for National Grid and no one else in
connection with the Merger and will not be responsible to anyone other
than National Grid for providing the protections afforded to customers
of Rothschild or for providing advice in relation to the Merger.
JPMorgan is acting exclusively for Lattice and no one else in connection
with the Merger and will not be responsible to anyone other than Lattice
for providing the protections afforded to customers of JPMorgan or for
providing advice in relation to the Merger.
Cazenove is acting exclusively for Lattice and no one else in connection
with the Merger and will not be responsible to anyone other than Lattice
for providing the protections afforded to customers of Cazenove or for
providing advice in relation to the Merger.
Nothing in this announcement should be construed as a profit forecast or
be interpreted to mean that the earnings per share of National Grid
Transco will necessarily be greater than the historic earnings per share
of National Grid or Lattice.
Unless otherwise determined by National Grid and Lattice and permitted
by applicable law and regulation, the terms of the offer will not be
made, directly or indirectly, in or into, or by the use of mails of, or
by any other means or instrumentality (including, without limitation,
telephonically or electronically) of interstate or foreign commerce of,
or of any facility of a national securities exchange of Canada, nor will
it be made in or into Australia or Japan. Accordingly, unless otherwise
determined by National Grid and Lattice and permitted by applicable law
and regulations, neither copies of this announcement nor any other
documents relating to the Merger are being, or may be, mailed or
otherwise forwarded, distributed or sent in or into Australia, Canada or
Japan and persons receiving such documents (including custodians,
nominees and trustees) must not distribute or send them in, into or from
such jurisdictions.
The release, publication or distribution of this announcement in certain
jurisdictions may be restricted by law and therefore persons in such
jurisdictions into which this announcement is released, published or
distributed should inform themselves about and observe such
restrictions.
This announcement contains certain statements that are neither reported
financial results nor other historic information. These statements are
"forward-looking statements" within the meaning of the safe-harbour
provisions of the US federal securities laws. Because these forward-
looking statements are subject to risks and uncertainties, actual future
results may differ materially from those expressed in or implied by the
statements. Many of these risks and uncertainties relate to factors
that are beyond the companies' ability to control or estimate precisely,
such as future market conditions, currency fluctuations, the behaviour
of other market participants and the actions of governmental regulators.
Other factors that could cause actual results to differ materially from
those described in this announcement include: the ability to integrate
Lattice successfully within National Grid Transco or to realise
synergies from such integration or the failure to retain key management
and other risk factors detailed in National Grid's reports filed with
the SEC or in material furnished to the SEC by National Grid or Lattice.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date of this
announcement. The companies do not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this announcement.
The Panel wishes to draw the attention of member firms of the New York
Stock Exchange to certain UK dealing disclosure requirements during the
offer period. The offer period (in accordance with the City Code, which
is published and administered by the Panel) commences at the time when
an announcement is made of a proposed or possible offer, with or without
terms. National Grid has equity securities traded on the London Stock
Exchange and the New York Stock Exchange and Lattice has equity
securities traded on the London Stock Exchange.
The above disclosure requirements are set out in more detail in Rule 8
of the City Code. In particular, Rule 8 requires public disclosure of
dealings during the offer period by persons who own or control, or who
would as a result of any transaction own or control, one per cent. or
more of any class of relevant securities of the offeror or offeree
company. Relevant securities include National Grid Shares, National
Grid ADSs, instruments convertible into National Grid Shares or National
Grid ADSs, Lattice Shares and instruments convertible into Lattice
Shares. This requirement will apply until the end of the offer period.
Disclosure should be made on an appropriate form by no later than 12
noon London time on the business day following the date of the dealing
transaction. These disclosures should be sent to the Company
Announcements Office of the London Stock Exchange (fax number: 44 207
588 6057).
The Panel requests that member firms advise those of their clients who
wish to deal in the relevant securities of National Grid or Lattice,
whether in the United States or in the UK, that they may be affected by
these requirements. If there is any doubt as to their application the
Panel should be consulted (telephone number: 44 207 382 9026, fax
number: 44 207 638 1554).
Part 2
22 April 2002
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR
INTO CANADA, AUSTRALIA OR JAPAN
MERGER OF NATIONAL GRID AND LATTICE TO CREATE A LEADING INTERNATIONAL
ENERGY DELIVERY COMPANY
1. Introduction
The directors of National Grid and Lattice announce that they have
unanimously agreed the terms of a recommended merger of equals to form
National Grid Transco.
The terms of the Merger are based on the recent relative equity market
capitalisations of the two companies. Under the terms of the Merger,
National Grid Shareholders will retain their shares in National Grid (to
be renamed National Grid Transco) and Lattice Shareholders will receive
0.375 New National Grid Transco Shares for each Lattice Share held at
the relevant record date. Upon completion of the Merger, National Grid
Shareholders will hold approximately 57.3 per cent. and Lattice
Shareholders will hold approximately 42.7 per cent. of the issued share
capital of National Grid Transco, based on the current issued share
capital of the two companies.
Lattice Shareholders will remain entitled to receive Lattice's second
interim dividend of 5.4 pence per Lattice Share to be paid on 14 June
2002. National Grid Shareholders will have the right to receive the
National Grid Final Dividend of 9.58 pence per National Grid Share to be
paid on 15 August 2002.
Rothschild is acting as financial adviser to National Grid and Credit
Suisse First Boston and Merrill Lynch are acting as joint corporate
brokers. JPMorgan and Cazenove are acting as joint financial advisers
to Lattice and Hoare Govett and Cazenove are acting as joint corporate
brokers.
2. BENEFITS ARISING FROM THE MERGER
The Boards of National Grid and Lattice believe that the Merger will
create a business which is able to generate superior returns for
shareholders from opportunities in a number of areas:
Creation of a leading international energy delivery company
The Merger will create a leading international energy delivery company
with a combined market capitalisation of approximately 14.8 billion
pounds sterling (based on the National Grid Closing Price and the
Lattice Closing Price).
In Great Britain, Lattice owns and manages the principal gas
transportation system, comprising approximately 6,400 km of high
pressure pipelines and around 275,000 km of lower pressure (local
transmission and distribution) pipelines. National Grid owns and
manages the high-voltage electricity transmission network in England and
Wales, comprising approximately 8,000 km of overhead lines and
underground cables. Lattice is continuing to make good progress on
restructuring Transco into the National Transmission System and eight
Regional Distribution Networks. National Grid Transco will work
constructively with Ofgem to facilitate the creation of individual price
controls to provide the Merged Group with flexibility and structural
options for the future.
In the US, National Grid has electric transmission and distribution
assets with a total length of approximately 140,000 km, serving over 3.2
million electricity customers. It also has a gas distribution network,
comprising approximately 15,000 km of pipelines and mains, serving over
0.5 million customers in New York State.
Both National Grid and Lattice utilise their existing infrastructure to
provide solutions to the wireless communications industry. Combined,
the enlarged business will be the third largest independent
communication towers provider in the UK. Together the businesses will
provide broader coverage to mobile operators and be well positioned to
exploit growth opportunities. The strategic options for 186k, Lattice's
fibre-optic telecommunications business, are being reviewed with a view
to resolving the future of the business in the course of this financial
year.
Utilisation of complementary skills to maximise value for shareholders
and customers
National Grid and Lattice share a complementary set of core skills in
the development, operation and management of complex networks. Since
their privatisations, each of National Grid and Lattice have proven
their ability to improve the operating efficiency of their UK regulated
businesses. The directors of National Grid and Lattice believe that
bringing these businesses together will generate significant
opportunities for creating shareholder value through enhanced operating
performance and the sharing of best practice, for example between the US
and UK businesses.
The Merger will provide an opportunity to improve the operation of gas
and electricity transmission further, and will allow better overall
network planning, which is important in light of increasing
interdependence of these systems.
Enhanced growth opportunities
National Grid has a proven track record in creating material value from
expansion in the US and, following a number of acquisitions in recent
years, is one of the largest energy delivery companies in the North East
US. The US is the world's largest energy market and has proved
attractive for expansion due to its fragmented nature and the ability to
earn attractive returns within long-term regulatory frameworks.
The increased size and financial capacity of the Merged Group combined
with expertise in managing both gas and electricity networks should
enable it to continue to exploit growth opportunities in the US and
those which, over time, are expected to emerge in Europe as the market
is liberalised and structural reforms are implemented.
Prospects for future outperformance and financial benefits from the
Merger
The directors of National Grid and Lattice are confident of exceeding
their regulatory efficiency targets currently in place, which became
effective in April 2001 for National Grid and April 2002 for Transco.
National Grid previously announced a target of a 20 per cent. reduction
in controllable costs over the remainder of its current price control
period. This represented a modest outperformance against Ofgem's
targets. National Grid is today announcing that it is now able to
increase its target to 30 per cent. which would result in delivery of an
additional 80 million pounds sterling savings over the remainder of the
period.
The Merger will generate pre-tax financial benefits that are expected to
reach an annualised rate of at least 100 million pounds sterling by the
end of the first full financial year following completion of the Merger.
The directors of National Grid and Lattice believe that these financial
benefits will arise principally from the elimination of duplicate head
office costs and other central cost savings and from combining the
support services provided to the UK regulated electricity and gas
businesses.
Further savings are expected to be achievable from the progressive
combination of the operations of the two UK transmission businesses,
sharing best practice between the US and UK businesses and further
financial synergies.
Financial impact
The Merger is expected to enhance earnings per share (pre-exceptional
items) for both National Grid and Lattice in the first full financial
year following completion of the Merger (2). The Merged Group will
seek to maintain a single A credit rating.
National Grid Transco will have the balance sheet strength and cashflows
to facilitate its future growth strategy and underpin its dividend
policy which aims to increase dividends per share (expressed in pounds
sterling) by 5 per cent. in real terms per annum for each year to 31
March 2006. This will be based on National Grid's full year dividend of
16.04 pence per National Grid Share for the financial year ended 31
March 2002, which includes the recommended National Grid Final Dividend.
National Grid Transco will continue to evaluate opportunities to release
capital throughout the Merged Group for redeployment in higher growth
opportunities, particularly in the US.
3. BOARD OF DIRECTORS, MANAGEMENT AND ORGANISATION
The Board of National Grid Transco will be drawn from the Boards of
National Grid and Lattice. The Non-Executive Chairman of National Grid
Transco will be Sir John Parker, Chairman and acting Chief Executive of
Lattice. James Ross, Chairman of National Grid, will be Non-Executive
Deputy Chairman. Roger Urwin, Chief Executive of National Grid, will be
Chief Executive and Steve Lucas, Finance Director of Lattice, will be
Group Finance Director of the Merged Group. In addition to the Chief
Executive and Finance Director, the executive management team will
comprise Edward Astle, Steven Holliday, Colin Matthews, Rick Sergel and
John Wybrew. Stephen Box, National Grid Finance Director, will take
early retirement on the grounds of ill-health upon the completion of the
Merger.
A further six Non-Executive directors will be drawn equally from the
Boards of National Grid and Lattice.
-----------
(2) The statement that the Merger will be earnings per share enhancing
for National Grid and Lattice should not, however, be interpreted to
mean that earnings per share in the first full financial year following
the Merger, or in any subsequent period, will necessarily be greater
than those for the relevant preceding financial period.
4. EMPLOYEES
National Grid and Lattice attach great importance to retaining the
skills and expertise of their management and employees. The Boards of
National Grid and Lattice believe that, although the combination of
similar functions will necessarily lead to some staff reductions, the
greater strength, market position and growth prospects for the Merged
Group will generally enhance career prospects. So far as possible, job
losses will be achieved by normal staff turnover, voluntary redundancy
and early retirement.
The existing employment rights of employees of both National Grid and
Lattice will be fully safeguarded.
5. DETAILS OF THE MERGER
The terms of the Merger are based on the recent relative equity market
capitalisations of the two companies.
The Merger is intended to be implemented by way of the Scheme of
Arrangement. Under the Scheme, National Grid will issue New National
Grid Transco Shares to Lattice Shareholders on the basis of 0.375 New
National Grid Transco Shares for each Lattice Share held at the relevant
record date, and so in proportion for any other number of Lattice
Shares. Upon completion of the Merger, National Grid Shareholders will
hold approximately 57.3 per cent. and Lattice Shareholders will hold
approximately 42.7 per cent. of the issued share capital of National
Grid Transco, based on the current issued share capital of the two
companies.
If a Lattice Shareholder has a fractional entitlement to New National
Grid Transco Shares with a value in excess of 3.00 pounds sterling, such
entitlement will be aggregated and sold for the benefit of the relevant
Lattice Shareholder. Otherwise, fractions of a New National Grid Transco
Share will not be allotted but will be aggregated and sold for the
benefit of the Merged Group.
The holdings and rights of holders of existing National Grid Shares and
of National Grid ADSs will not be affected by the Merger.
Under the Scheme, Lattice's current issued share capital will be
cancelled and re-issued to National Grid. National Grid will therefore
become the listed holding company of the Merged Group and conditional
upon the Merger becoming effective will change its name to National Grid
Transco and retain its listings on the London and New York Stock
Exchanges.
The Merger is subject to the conditions and further terms set out in
Appendix 1, including the approval of the Merger and related matters by
shareholders of both National Grid and Lattice as described below,
satisfaction of certain regulatory conditions as described below, and
sanction of the Scheme by the Court.
The implementation of the Scheme will require approval by a special
resolution of Lattice Shareholders to be proposed at
the Lattice Extraordinary General Meeting. The Scheme will also
require approval separately by Lattice Shareholders at the Lattice Court
Meeting. The approval required at the Lattice Court Meeting is a
majority in number representing 75 per cent. in nominal value of those
Lattice Shareholders who vote at that meeting.
The Merger will also require approval by an ordinary resolution of
National Grid Shareholders to be proposed at the National Grid
Extraordinary General Meeting. Special resolutions to change the name of
National Grid to National Grid Transco and to alter its articles of
association will also be proposed at the National Grid Extraordinary
General Meeting. In order to implement the Merger, the articles of
association of National Grid will need to be amended to change the
rights of the Secretary of State, principally to reflect National Grid's
ownership of Transco.
The implementation of the Scheme can only become effective if all the
conditions to the Merger have been satisfied or, where relevant, waived.
The Scheme will become effective on the delivery to the Registrar of
Companies in England and Wales by Lattice of a copy of the order of the
Court sanctioning the Scheme and the registration of such order. Once
the Scheme becomes effective, the terms will be binding on all Lattice
Shareholders whether or not they voted in favour.
The formal documentation relating to the Merger is expected to be sent
to shareholders by the end of June in order for appropriate resolutions
to implement the Merger to be proposed at meetings immediately following
Lattice and National Grid's Annual General Meetings on 15 July 2002 and
23 July 2002 respectively. Following receipt of the relevant
shareholder, regulatory and Court approvals, it is currently expected
that the Scheme will become effective and that the Merger will complete
during the autumn of 2002.
6. YEAR END, DIVIDEND PAYMENT AND DIVIDEND POLICY
Following completion of the Merger, it is intended that the accounting
reference date for National Grid Transco will remain as 31 March.
Lattice Shareholders will remain entitled to the second interim dividend
of 5.4 pence per Lattice Share, which was declared by Lattice on 7
February
2002 and is due to be paid on 14 June 2002. Lattice will not pay a
final dividend in respect of the 15 month period ended 31 March 2002.
National Grid Shareholders will have the right to receive the National
Grid Final Dividend of 9.58 pence per National Grid Share to be paid on
15 August 2002. New National Grid Transco Shares, issued pursuant to
the Merger, will rank pari passu with the existing National Grid Shares
save that they will not be entitled to receive the National Grid Final
Dividend, or any interim dividend as described below.
On completion of the Merger, National Grid Transco intends to pay
dividends which reflect National Grid's current dividend policy, which
aims to increase dividends per share (expressed in pounds sterling) by 5
per cent. per annum in real terms for each year to 31 March 2006. This
will be based on National Grid's full year dividend of 16.04 pence per
National Grid Share for the year ended 31 March 2002.
It is expected that the first dividend paid by National Grid Transco
will be the interim dividend in respect of the financial year ending 31
March 2003.
In the event that the Merger does not become effective prior to the
announcement of National Grid's interim results for the 6 months to 30
September 2002, it is intended that both companies will announce their
interim results and interim dividends on the same day. Lattice
Shareholders will be entitled to an interim dividend on the basis that
each Lattice Share will be entitled to an amount equal to 37.5 per cent
of the declared dividend per National Grid Share for the period.
7. REGULATORY CONSENTS
The Merger cannot be completed until a number of conditions have been
satisfied, which include the receipt of regulatory and other consents
and approvals in the UK and the US, to the satisfaction of National Grid
and Lattice. In the UK, the required regulatory approvals include
obtaining the consent of the Secretary of State as the holder of the
Lattice Special Share and the Secretary of State not referring the
Merger to the Competition Commission. The parties will involve Ofgem
throughout these processes. In addition, the consent of the Secretary
of State will be required under a licence granted to Lattice under the
Telecommunications Act 1984.
The principal regulatory approval required in the US is approval from
the Securities and Exchange Commission under the Public Utility Holding
Company Act of 1935 of the issue of the New National Grid Transco Shares
to Lattice Shareholders in connection with the Merger. The approval of
certain other US regulatory agencies may be required.
All such regulations, consents and/or approvals are expected to be
received so that completion of the Merger can occur during the autumn of
2002.
8. SETTLEMENT, LISTING AND DEALING
Applications will be made to the UK Listing Authority for the New
National Grid Transco Shares to be admitted to the Official List and to
the London Stock Exchange for such shares to be admitted to trading on
the London Stock Exchange's market for listed securities.
It is expected that admission will become effective and that dealings,
for normal settlement, will commence on the day on which the Scheme
becomes effective.
National Grid Shareholders who hold their shares in certificated form
will retain their existing certificates which will remain valid. New
certificates in the name of National Grid Transco will be issued when
transfers to persons who wish to hold their National Grid Transco Shares
in certificated form are lodged for registration. National Grid ADS
holders who hold their ADSs in certificated form will also retain their
ADS certificates which will remain valid as ADSs of National Grid
Transco. National Grid intends to amend its existing deposit agreement
such that, following completion of the Merger, any new certificated ADSs
issued and any previously outstanding ADS certificates presented for
registration of transfer will be issued in the name of National Grid
Transco.
Certificates for New National Grid Transco Shares to be issued to
Lattice Shareholders pursuant to the Merger are expected to be
despatched no later than 14 days after the Scheme becomes effective. No
certificates for New National Grid Transco Shares will be issued in
respect of the entitlements of Lattice Shareholders who hold their
shares through CREST, settlement for which will be made through the
applicable CREST procedures.
Further details on settlement, listing and dealing will be included in
the documents to be sent to National Grid Shareholders and Lattice
Shareholders.
9. INTERESTS IN SHARES
Neither National Grid nor any director of National Grid, nor, so far as
National Grid is aware, any party acting in concert with National Grid,
owns or controls any Lattice Shares or any securities convertible or
exchangeable into, or any rights to subscribe for or purchase, or any
options to purchase any Lattice Shares or holds any derivatives
referenced to Lattice Shares. In the interests of confidentiality,
National Grid has not made any enquiries in this respect of certain
parties who may be presumed by the Panel to be acting in concert with it
for the purposes of the Merger.
10. EMPLOYEE SHARE SCHEMES
Prior to completion of the Merger, National Grid and Lattice will
continue to grant options and awards under their respective employee
share schemes in the ordinary course.
Appropriate proposals will be made to participants in the Lattice Share
Schemes, full details of which will be contained in the documentation to
be sent to National Grid and Lattice Shareholders.
11. UNITED KINGDOM AND UNITED STATES TAXATION
Subject, where applicable, to receipt of the Inland Revenue clearance
under section 138 of the Taxation of Chargeable Gains Act 1992 referred
to below, Lattice Shareholders who are resident in the UK for tax
purposes will not be treated as making a "disposal" of their Lattice
Shares for the purposes of UK capital gains taxation ("CGT") to the
extent they receive New National Grid Transco Shares pursuant to the
Merger. Instead, Lattice Shareholders will be able to "roll-over" any
gain or loss which would otherwise have arisen into the New National
Grid Transco Shares which they receive.
Lattice Shareholders may realise a disposal for CGT purposes to the
extent they receive cash in lieu of fractional entitlements to New
National Grid Transco Shares pursuant to the Merger.
Applications for clearance in respect of the Merger under section 138 of
the Taxation of Chargeable Gains Act 1992 and Section 215 of the Income
and Corporation Taxes Act 1998 are being made today.
Further details of relevant tax issues will be given in the documents to
be despatched to National Grid Shareholders and Lattice Shareholders.
The directors of Lattice currently expect that Lattice Shareholders who
are US persons who hold Lattice Shares as capital assets generally will
not recognise any gain (or loss) for US federal income tax purposes upon
the receipt of the New National Grid Transco Shares or the cancellation
of the Lattice Shares except to the extent of any cash received in lieu
of fractional entitlements.
12. INDUCEMENT FEE
As an inducement to both National Grid and Lattice to enter into and
implement the Merger, National Grid and Lattice have entered into an
agreement. Such agreement provides for either party to pay the other a
fee of 60 million pounds sterling if:
(i) an announcement is made during the offer period by a third
party indicating an intention to make an offer for, or
proposal relating to the change of control of, either party,
as a result of which either (a) the shareholders of such
party do not pass the necessary resolutions approving the
Merger, or (b) such party terminates discussions with the
other party; or
(ii) either party notifies or indicates to the other party that
its directors will not unanimously recommend its
shareholders to vote in favour of the Merger or the
directors of such party do not make such recommendation or
withdraw their recommendation or recommend an alternative
offer or transaction involving a change of control; or
(iii) either party takes any action or omits to take any action
(other than as a consequence of a third party regulatory
body failing to approve the Merger or placing unacceptable
conditions on the Merger in the reasonable opinion of either
party) which is reasonably likely to cause the Merger to not
become effective,
and in each case the Merger does not become effective in accordance with
its terms.
13. RECOMMENDATIONS
The Board of National Grid, which has been advised by Rothschild,
considers the terms of the Merger to be fair and reasonable to National
Grid. In providing advice to the National Grid Board, Rothschild has
taken into account the National Grid Board's commercial assessments.
The National Grid Board considers the Merger to be in the best interests
of National Grid Shareholders as a whole and will unanimously recommend
National Grid Shareholders to vote in favour of the resolutions to be
proposed at the National Grid Extraordinary General Meeting relating to
the Merger as they intend to do in respect of their own beneficial
holdings.
The Lattice Board, which has been so advised by JPMorgan and Cazenove,
considers the terms of the Merger to be fair and reasonable to Lattice.
In providing advice to the Lattice Board, JPMorgan and Cazenove have
taken into account the Lattice Board's commercial assessments. The
Lattice Board considers the Merger to be in the best interests of
Lattice Shareholders as a whole and will unanimously recommend Lattice
Shareholders to vote in favour of the resolutions relating to the Merger
to be proposed at the Lattice Court Meeting and the Lattice
Extraordinary General Meeting as they intend to do in respect of their
own beneficial holdings.
Enquiries:
National Grid Lattice
(011) 44 207 312 5781 (011) 207 389 3200
Roger Urwin Sir John Parker
Stephen Box Steve Lucas
Investor Relations Investor Relations
Marcy Reed 44 207 312 5779 Melissa Sellars 44 207 389 3219
Terry McCormick 44 207 312 5785 Gary Rawlinson 44 207 389 3218
Louise Clamp 44 207 312 5783
Media Relations Media Relations
Clive Hawkins 44 207 312 5757 Gillian Home 44 207 389 3212
Jim Willison 44 207 389 3213
Rothschild 44 207 280 5000 JP Morgan 44 207 325 8431
Nicholas Wrigley Robert McGuire
James Douglas-Hamilton Jeremy Wilson
Cazenove 44 207 588 2828
Nick Wiles
Patrick Magee
Citigate Dewe Rogerson The Maitland Consultancy
Anthony Carlisle 44 207 638 9571 Angus Maitland 44 207 379 5151
44 797 361 1888 44 778 526 8283
Photographs will be available on www.newscast.com
This announcement does not constitute an offer to sell or invitation to
purchase any securities or the solicitation of any vote or approval in
any jurisdiction.
This announcement has been issued by National Grid and Lattice and is
the responsibility of National Grid and Lattice and has been approved
solely for the purposes of section 21 of the Financial Services and
Markets Act 2000 by N M Rothschild and Sons Limited of New Court, St
Swithin's Lane, London, EC4P 4DU; J.P. Morgan plc of 125 London Wall,
London, EC2Y 5AJ; and Cazenove and Co. Ltd of 12 Tokenhouse Yard,
London, EC2R 7AN.
The directors of National Grid and the directors of Lattice jointly
accept responsibility for the information contained in this announcement
other than the information relating solely to National Grid or Lattice
and their respective subsidiaries, associates, shareholders and
directors, for which the directors of National Grid and Lattice
respectively accept such responsibility. To the best of the knowledge,
information and belief of such directors (who have taken all
reasonable care to ensure that such is the case), the information
contained in this announcement for which they accept responsibility is
in accordance with the facts and does not omit anything likely to affect
the import of such information.
National Grid and Lattice have been advised that the New National Grid
Transco Shares to be issued under the Scheme are exempt from the
registration requirements of the US Securities Act of 1933, as amended
and, as a consequence, the New National Grid Transco Shares to be issued
under the Scheme will not be registered thereunder.
Rothschild is acting exclusively for National Grid and no one else in
connection with the Merger and will not be responsible to anyone other
than National Grid for providing the protections afforded to customers
of Rothschild or for providing advice in relation to the Merger.
JPMorgan is acting exclusively for Lattice and no one else in connection
with the Merger and will not be responsible to anyone other than Lattice
for providing the protections afforded to customers of JPMorgan or for
providing advice in relation to the Merger.
Cazenove is acting exclusively for Lattice and no one else in connection
with the Merger and will not be responsible to anyone other than Lattice
for providing the protections afforded to customers of Cazenove or for
providing advice in relation to the Merger.
Nothing in this announcement should be construed as a profit forecast or
be interpreted to mean that the earnings per share of National Grid
Transco will necessarily be greater than the historic earnings per share
of National Grid or Lattice.
Unless otherwise determined by National Grid and Lattice and permitted
by applicable law and regulation, the terms of the offer will not be
made, directly or indirectly, in or into, or by the use of mails of, or
by any other means or instrumentality (including, without limitation,
telephonically or electronically) of interstate or foreign commerce of,
or of any facility of a national securities exchange of Canada, nor will
it be made in or into Australia or Japan. Accordingly, unless otherwise
determined by National Grid and Lattice and permitted by applicable law
and regulations, neither copies of this announcement nor any other
documents relating to the Merger are being, or may be, mailed or
otherwise forwarded, distributed or sent in or into Australia, Canada or
Japan and persons receiving such documents (including custodians,
nominees and trustees) must not distribute or send them in, into or from
such jurisdictions.
The release, publication or distribution of this announcement in certain
jurisdictions may be restricted by law and therefore persons in such
jurisdictions into which this announcement is released, published or
distributed should inform themselves about and observe such
restrictions.
This announcement contains certain statements that are neither reported
financial results nor other historic information. These statements are
"forward-looking statements" within the meaning of the safe-harbour
provisions of the US federal securities laws. Because these forward-
looking statements are subject to risks and uncertainties, actual future
results may differ materially from those expressed in or implied by the
statements. Many of these risks and uncertainties relate to factors
that are beyond the companies' ability to control or estimate precisely,
such as future market conditions, currency fluctuations, the behaviour
of other market participants and the actions of governmental regulators.
Other factors that could cause actual results to differ materially from
those described in this announcement include: the ability to integrate
Lattice successfully within National Grid Transco or to realise
synergies from such integration or the failure to retain key management
and other risk factors detailed in National Grid's reports filed with
the SEC or in material furnished to the SEC by National Grid or Lattice.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date of this
announcement. The companies do not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this announcement.
The Panel wishes to draw the attention of member firms of the New York
Stock Exchange to certain UK dealing disclosure requirements during the
offer period. The offer period (in accordance with the City Code, which
is published and administered by the Panel) commences at the time when
an announcement is made of a proposed or possible offer, with or without
terms. National Grid has equity securities traded on the London Stock
Exchange and the New York Stock Exchange and Lattice has equity
securities traded on the London Stock Exchange.
The above disclosure requirements are set out in more detail in Rule 8
of the City Code. In particular, Rule 8 requires public disclosure of
dealings during the offer period by persons who own or control, or who
would as a result of any transaction own or control, one per cent. or
more of any class of relevant securities of the offeror or offeree
company. Relevant securities include National Grid Shares, National
Grid ADSs, instruments convertible into National Grid Shares or National
Grid ADSs, Lattice Shares and instruments convertible into Lattice
Shares. This requirement will apply until the end of the offer period.
Disclosure should be made on an appropriate form by no later than 12
noon London time on the business day following the date of the dealing
transaction. These disclosures should be sent to the Company
Announcements Office of the London Stock Exchange (fax number: 44 207
588 6057).
The Panel requests that member firms advise those of their clients who
wish to deal in the relevant securities of National Grid or Lattice,
whether in the United States or in the UK, that they may be affected by
these requirements. If there is any doubt as to their application the
Panel should be consulted (telephone number: 44 207 382 9026, fax
number: 44 207 638 1554).
Appendix 1
CONDITIONS TO THE IMPLEMENTATION OF THE SCHEME AND THE MERGER
The Merger is conditional upon the Scheme becoming unconditional and
becoming effective by not later than 31 March 2003 or such later date
(if any) as Lattice and National Grid may agree and the Court may allow.
1. The Scheme is conditional upon:
(a) the approval by the Special Shareholder and a majority in
number representing three-fourths in nominal value of the
holders of Lattice Shares present and voting, either in person
or by proxy, at the Lattice Court Meeting;
(b) the special resolution required to approve and implement the
Scheme being passed at the Lattice Extraordinary General
Meeting;
(c) any resolutions of National Grid Shareholders required in
connection with the implementation of the Merger being passed
at the National Grid Extraordinary General Meeting;
(d) the admission to the Official List of the New National Grid
Transco Shares becoming effective in accordance with the
Listing Rules and the admission of such shares to trading on
the London Stock Exchange's market for listed securities
becoming effective or (if determined by National Grid and
Lattice and subject to the consent of the Panel) the UK
Listing Authority agreeing or confirming its decision to admit
such shares to the Official List and the London Stock Exchange
agreeing to admit such shares to trading subject only to (i)
the allotment of such shares and/or (ii) the Scheme becoming
unconditional in all respects; and
(e) the sanction (with or without modification) of the Scheme by
the Court on terms satisfactory to both National Grid and
Lattice acting reasonably and an office copy of the Order of
the Court being delivered by Lattice for registration to the
Registrar of Companies in England and Wales and registration
of the Order confirming the reduction of capital involved in
the Scheme by the Registrar of Companies in England and Wales.
2. National Grid and Lattice have agreed that, subject as stated in
paragraph 3 below, the Merger is also conditional upon, and,
accordingly, the necessary action to make the Scheme effective will
not be taken unless the following conditions are satisfied or
waived as referred to below prior to the Scheme being sanctioned
by the Court:
(a) the SEC having granted prior approval to National Grid
authorising the issuance and sale of such New National Grid
Transco Shares necessary to finance the Merger (as well as the
solicitation of proxies), and the SEC not opposing the
certification of Lattice as a foreign utility company under
section 33 of PUHCA, on terms satisfactory to National Grid
and Lattice acting reasonably;
(b) any conditions imposed by the SEC in relation to the
continuing operation of National Grid as a registered public
utility holding company under PUHCA being on terms
satisfactory to both National Grid and Lattice acting
reasonably;
(c) to the extent that Council Regulation EEC 4064/89, as amended,
may be applicable, the European Commission having either:
(i) indicated that the Merger and its implementation does not
give rise to a concentration falling within the scope of
Council Regulation (EEC) 4064/89 concerning the control
of concentrations between undertakings (as amended) (the
"Merger Regulation"); or
(ii) taken a decision, without imposing any conditions or
obligations that are not satisfactory to both National
Grid and Lattice acting reasonably under Article 6(1)(b)
of the Merger Regulation, declaring the Merger or its
implementation compatible with the common market, or
being deemed to have done so under Article 10(6); or
(iii)referred the whole or part of the Merger or its
implementation to the competent authorities of one or
more Member States under Article 9(3) of the Merger
Regulation or having been deemed to have done so under
Article 9(5); and
(a) each such authority having granted a clearance
without imposing any conditions or obligations that
are not satisfactory to both National Grid and
Lattice acting reasonably in respect of all of those
parts of the Merger or its implementation which were
referred to it, or being deemed to have granted such
a clearance; and
(b) the requirements of paragraph (c)(ii) above being
satisfied with respect to any part not referred to
the competent authority of any Member State;
(d) insofar as the merger provisions of the Fair Trading Act 1973
may be applicable, whether in accordance with (c)(iii) above
or otherwise, the Office of Fair Trading in the United Kingdom
indicating, on terms satisfactory to both National Grid and
Lattice acting reasonably, that it is not the intention of the
Secretary of State to refer the Merger or any matter arising
therefrom or related thereto to the Competition Commission;
(e) all filings (if any) in connection with the Merger and matters
arising therefrom having been made under the United States
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as
amended) and the regulations made thereunder, all or any
appropriate waiting and other time periods (including
extensions thereof) having expired, lapsed or been terminated;
(f) the Gas and Electricity Markets Authority indicating that it,
and the Secretary of State indicating that she:
(i) does not intend to seek modifications to any of the Wider
National Grid Group licences or the Wider Lattice Group
licences granted under the Electricity Act or the Gas Act
and subsequent legislation, including the Utilities Act
2000 (except on terms satisfactory to both National Grid
and Lattice acting reasonably);
(ii) does not intend to seek undertakings or assurances from
any member of the Wider National Grid Group or the Wider
Lattice Group, other than those already required to be
given under the licence granted to Transco under the Gas
Act (except on terms satisfactory to both National Grid
and Lattice acting reasonably);
(iii)will, in connection with the Merger, give such consents
and/or directions (if any) and/or seek or agree to such
modifications (if any) as are necessary in the opinion of
National Grid or Lattice or both acting reasonably in
connection with the licences referred to in (f)(i);
(g) National Grid having obtained authorisations from such US
regulatory agencies as may have or assert jurisdiction over
the Merger on terms and conditions satisfactory to National
Grid and Lattice acting reasonably;
(h) if applicable, the review and investigation of the Merger
under the Exon-Florio Amendment to the US Defense Production
Act of 1950 having been terminated and the President of the
United States having taken no action thereunder with respect
to the Merger;
(i) the receipt from the Inland Revenue of clearances in respect
of the Scheme and the Merger under section 138 of the Taxation
of Chargeable Gains Act 1992 and section 215 of the Income and
Corporation Taxes Act 1988 in a form satisfactory to National
Grid and Lattice, acting reasonably;
(j) all authorisations, orders, grants, recognitions,
confirmations, consents, clearances, certificates, licences,
permissions and approvals necessary or reasonably considered
by National Grid or Lattice to be material in the context of
the Merger for or in respect of the Merger and the
implementation of the Scheme having been obtained (including
consent from the Secretary of State (1) under Wider Lattice
Group licences granted under the Telecommunications Act 1984;
and (2) as holder of the Lattice Special Share), in terms and
in a form satisfactory to National Grid and Lattice, acting
reasonably, and, where the withdrawal or absence of any such
authorisations, orders, grants, recognitions, confirmations,
consents, clearances, certificates, licences, permissions and
approvals would, in the opinion of both of National Grid and
Lattice (acting reasonably), have a material adverse effect on
the Merged Group, these remaining in full force and effect and
no intimation of an intention to revoke or not renew any of
these having been received, and all necessary notifications
and filings having been made and all necessary waiting periods
(including any extensions thereof) under any applicable
legislation or regulation of any jurisdiction having
expired or having been terminated (as appropriate)
and all necessary statutory and regulatory obligations in
connection with the Merger and the implementation of the
Scheme in any jurisdiction having been complied with;
(k) no central bank, government or governmental,
quasi-governmental, state or local government, supranational,
statutory, environmental, administrative, investigative or
regulatory body, agency, court, association or any other
similar person or body in any jurisdiction having taken,
instituted, implemented or threatened any action, proceeding,
suit, investigation or enquiry, or enacted, made or proposed
any statute, regulation or order, or taken any other step that
would or might in the opinion of National Grid and Lattice
(acting reasonably) in any respect be material to the Merged
Group to:
(i) require the divestiture by National Grid or Lattice or
any member of either the Wider National Grid Group or
Wider Lattice Group of all or any portion of their
respective businesses, assets or properties; or
(ii) require any member of either the Wider National Grid
Group or Wider Lattice Group to make an offer to acquire
any shares or other securities in any member of either
group owned by any third party; or
(iii)impose any limitation on the ability of any of them to
conduct their respective businesses or to own their
respective assets or properties or otherwise adversely
affect their respective businesses, assets or profits; or
(iv) make the Scheme or its implementation void,
unenforceable, illegal and/or prohibited in or under the
laws of any jurisdiction or otherwise directly or
indirectly restrict, restrain, prohibit, delay or
otherwise interfere with the implementation of, or impose
additional conditions or obligations with respect to, or
require amendment of, or otherwise challenge or interfere
with, the Merger;
(l) save as disclosed by National Grid to Lattice or by Lattice to
National Grid prior to 22 April 2002, there being no provision
of any arrangement, agreement, licence, permit, lease or other
instrument to which National Grid or Lattice, any member of
either the Wider National Grid Group or Wider Lattice Group is
a party or by or to which National Grid or Lattice or any
member of the Wider National Grid Group or Wider Lattice Group
may be bound, entitled or is subject which could or might in
the opinion of both National Grid and Lattice (acting
reasonably) result, to an extent which is material in the
context of the Merged Group, in:
(i) any monies borrowed by, or any other indebtedness or
liability (actual or contingent) of, or any grant
available to, any member of the Wider National Grid Group
or Wider Lattice Group being repayable or capable of
being declared repayable immediately or prior to their or
its stated maturity or the ability of any such member to
borrow monies or to incur any indebtedness being
withdrawn or inhibited or being capable of being
withdrawn or inhibited; or
(ii) any such arrangement, agreement, licence, permit, lease
or other instrument being terminated or adversely
modified or affected or any action being taken or any
obligation or liability arising thereunder; or
(iii)the rights, liabilities, obligations or interests of any
member of the Wider National Grid Group or Wider Lattice
Group in relation to, or the business of any member of
the Wider National Grid Group or Wider Lattice Group
with, any person, firm or body (or any arrangements
relating to any such interest or business) being
terminated or adversely modified or affected; or
(iv) the value, or financial or trading position or prospects
of any member of the Wider National Grid Group or Wider
Lattice Group being adversely modified or affected; or
(v) the creation of any material liability (actual or
contingent) by any member of the Wider National Grid
Group or Wider Lattice Group; or
(vi) the creation or enforcement of any mortgage, charge or
other security interest over the whole or any part of the
business, property or assets of any member of the Wider
National Grid Group or Wider Lattice Group or any such
mortgage, charge or security interest being enforced; or
(vii)any assets or interests of, or any asset the use of which
is enjoyed by, any member of the Wider National Grid
Group or the Wider Lattice Group being or falling to be
disposed of or charged or ceasing to be available to any
member of the Wider National Grid Group or the Wider
Lattice Group or any right arising under which any such
asset or interest could be required to be disposed of or
charged or ceasing to be available to any member of the
Wider National Grid Group or the Wider Lattice Group, in
each case, otherwise than in the ordinary course of
business; or
(viii)any member of the Wider National Grid Group or the Wider
Lattice Group, as the case may be, ceasing to be able to
carry on business under any name under which it presently
does so;
in each case in consequence of the Merger or the Scheme;
(m) National Grid not having discovered regarding Lattice, and
Lattice not having discovered regarding National Grid, on or
after 22 April 2002 that:
(i) any adverse financial, business or other information in
relation to circumstances existing prior to 22 April 2002
and which is material in the context of the relevant
group has not been publicly announced pursuant to the
Listing Rules by any member of the relevant group prior
to such date (in the case of such information regarding
National Grid) by National Grid or (in the case of such
information regarding Lattice) by Lattice; or
(ii) any financial, business or other information which has
been publicly announced pursuant to the Listing Rules at
any time by any member of the relevant group prior to 22
April 2002 (in the case of such information regarding
National Grid) by National Grid or (in the case of such
information regarding Lattice) by Lattice is misleading
or contains any misrepresentation of fact or omits to
state a fact necessary to make the information contained
therein complete and not misleading, and which in any
such case is adverse and material in the context of the
relevant group; or
(iii)any member of the relevant group is subject to any
liability (contingent or otherwise) which has not been
disclosed or reflected in the last published audited
consolidated accounts of its group or publicly announced
pursuant to the Listing Rules prior to 22 April 2002 (in
the case of a member of the Wider National Grid Group) by
National Grid or (in the case of a member of the Wider
Lattice Group) by Lattice and which is material in the
context of the relevant group;
(iv) any steps have been taken which are likely to result in
the withdrawal, cancellation, termination or modification
of any licence held by any member of the Wider National
Grid Group or Wider Lattice Group which is necessary for
the proper carrying on of its business to an extent which
is material in the context of the relevant group;
(n) (i) unless publicly announced by National Grid
pursuant to the Listing Rules or disclosed by National
Grid to Lattice prior to 22 April 2002, no litigation,
arbitration proceedings, prosecution or other legal
proceedings to which any member of the Wider National
Grid Group is a party (whether as claimant or defendant
or otherwise), in each case which is or may become
material and adverse in the context of the Wider National
Grid Group having been instituted or threatened or
remaining outstanding; or
(ii) since 31 March 2001, being the date to which the latest
audited report and accounts of National Grid were made
up, and unless publicly announced by National Grid
pursuant to the Listing Rules prior to 22 April 2002,
there having been no material adverse change or
deterioration in the business, assets, financial or
trading position or profits or prospects of the Wider
National Grid Group taken as a whole; or
(o) (i) unless publicly announced by Lattice pursuant to the
Listing Rules or disclosed by Lattice to National Grid
prior to 22 April 2002, no litigation, arbitration
proceedings, prosecution or other legal proceedings to
which any member of the Wider Lattice Group is a party
(whether as claimant or defendant or otherwise), in each
case which is or may become material and adverse in the
context of the Wider Lattice Group having been instituted
or threatened or remaining outstanding; or
(ii) since 31 December 2000, being the date to which the
latest audited report and accounts of Lattice were made
up, and unless publicly announced by Lattice pursuant to
the Listing Rules prior to 22 April 2002, there having
been no material adverse change or deterioration in the
business, assets, financial or trading position or
profits or prospects of the Wider Lattice Group taken as
a whole;
(p) other than as publicly announced by National Grid or Lattice
pursuant to the Listing Rules, or disclosed by National Grid
to Lattice, or by Lattice to National Grid, prior to 22 April
2002 or as contemplated by the Merger or the Scheme or by this
announcement, no member of the Wider National Grid Group or of
the Wider Lattice Group having since, in the case of National
Grid, 31 March 2001 and, in the case of Lattice, 31 December
2000, being the dates to which the respective latest audited
report and accounts of National Grid and Lattice were made up:
(i) issued or authorised or proposed the issue of additional
shares of any class, or securities convertible into or
exchangeable for, or rights, warrants or options to
subscribe for or acquire, any such shares or convertible
securities (save as between National Grid and Lattice
respectively and their respective wholly-owned
subsidiaries or for options granted, and any shares in
National Grid or Lattice respectively issued upon
exercise of options granted prior to 22 April 2002, under
or pursuant to the National Grid Share Schemes or the
Lattice Share Schemes or as agreed between National Grid
and Lattice from time to time) or redeemed, purchased or
reduced any part of its shares or other securities (or
agreed to do so) to an extent which (save in the case of
any such issue, authorisation, proposal, redemption,
purchase or reduction by National Grid or Lattice
respectively) is material in the context of the Wider
National Grid Group or Wider Lattice Group, as the case
may be; or
(ii) except for:
(a) transactions between one wholly-owned
member of the relevant group and another such member, and
(b) (in the case of Lattice) the Scheme,
authorised or proposed or announced its intention to
propose any merger or any change in its share or loan
capital or (other than in the ordinary course of
business) any acquisition or disposal of assets or shares
which is material in the context of the Wider National
Grid Group or Wider Lattice Group, as the case may be; or
(iii)(other than transactions between one wholly-owned member
of the relevant group and another such member) entered
into or varied in any material respect any contract,
transaction, arrangement or commitment (whether in
respect of capital expenditure or otherwise) (or agreed
to do so) which is of a long term, restrictive or unusual
or onerous nature and which is material in the context of
the Wider National Grid Group or Wider Lattice Group, as
the case may be, or which involves or could involve an
obligation of a nature or magnitude which is material in
the context of the Wider National Grid Group or Wider
Lattice Group, as the case may be, and in each case other
than in the ordinary course of business; or
(iv) save for normal annual salary and other related increases
in accordance with past remuneration policies entered
into or materially varied or made any offer to enter into
or materially vary the terms of any agreement, contract,
commitment or arrangement to an extent which is material
with any director of National Grid or Lattice, as the
case may be; or
(v) (other than transactions between one wholly-owned member
of the relevant group and another such member and, in the
case of Lattice, the Scheme) implemented, effected,
authorised or announced its intention to effect any
reconstruction, amalgamation, scheme, commitment or other
transaction or arrangement which, in any case, is
material in the context of the Wider National Grid Group
or Wider Lattice Group, as the case may be and in each
case other than in the ordinary course of business; or
(vi) issued, authorised or proposed the issue of any
debentures or, save in the ordinary course of business
and save for transactions between one wholly-owned member
of the relevant group and another such member, incurred
or increased (or agreed to incur or increase) any
indebtedness or contingent liability of an aggregate
amount which might materially and adversely affect the
Wider National Grid Group or Wider Lattice Group, as the
case may be; or
(vii)(in the case of National Grid or Lattice only)
recommended, declared, made or paid, or proposed the
recommendation, declaration, paying or making, of any
dividend, bonus or other distribution; or
(viii)in the case of any member of the Wider National Grid
Group or Wider Lattice Group made any alteration to its
memorandum or articles of association (or equivalent
constitutional documents in respect of overseas
jurisdictions of incorporation) that is material in the
context of the Wider National Grid Group or Wider Lattice
Group, as the case may be; or
(ix) (other than in respect of a member of the Wider National
Grid Group or Wider Lattice Group which is dormant and
was solvent at the relevant time) taken any corporate
action or had any legal proceedings instituted or
threatened against it for its winding-up (voluntary or
otherwise), dissolution, reorganisation or for the
appointment of any administrator, administrative
receiver, receiver, trustee or similar officer of all or
any material part of its assets or revenues or any
analogous proceedings in any jurisdiction or had any
analogous person appointed in any jurisdiction and which,
in any case, is material in the context of the Wider
National Grid Group or Wider Lattice Group, as the case
may be; or
(x) been unable, or admitted in writing that it is unable to
pay its debts or having stopped or suspended (or
threatened to stop or suspend) payment of its debts
generally or ceased or threatened to cease carrying on
all or a substantial part of its business and which, in
any case, is material in the context of the Wider
National Grid Group or Wider Lattice Group, as the case
may be; or
(xi) waived or compromised any claim otherwise than in the
ordinary course of business and which, in any case, is
material in the context of the Wider National Grid Group
or Wider Lattice Group, as the case may be; or
(xii)entered into any contract, commitment, agreement or
arrangement or passed any resolution made or announced
any offer (which remains open for acceptance) or
announced any intention or proposal to effect any of the
transactions, matters or events referred to in this
condition; or
(q) National Grid not having discovered regarding Lattice, and
Lattice not having discovered regarding National Grid on or
after 22 April 2002:
(i) any past or present member of the Wider National Grid
Group or Wider Lattice Group, as the case may be, has not
complied with any and/or all applicable legislation or
regulations of any relevant jurisdiction in which it
carries on business with regard to the disposal,
discharge, spillage, release, leak or emission of any
waste or hazardous substance or any substance which would
be likely to impair the environment or harm human health
or animal health, or otherwise relating to environmental
matters, or that there has otherwise been any such
disposal, spillage, release, discharge, leak or emission
(whether or not the same constituted a non-compliance by
any person with any such legislation or regulations, and
wherever the same may have taken place) any of which non-
compliance, disposal, spillage, release, discharge, leak
or emission would be likely to give rise to any liability
(whether actual or contingent) on the part of any member
of the Wider National Grid Group or Wider Lattice Group,
as the case may be, in each case to an extent which, in
any case, is material and adverse to the Wider National
Grid Group or Wider Lattice Group, as the case may be;
(ii) there is any material liability (actual or contingent) of
any past or present member of the Wider National Grid
Group or Wider Lattice Group, as the case may be, which
is material in the context of the Wider National Grid
Group or Wider Lattice Group, as the case may be, to make
good, repair, reinstate or clean up any property or any
controlled waters now or previously owned, occupied,
operated or made use of or controlled by any such past or
present member of the Wider National Grid Group or Wider
Lattice Group, as the case may be, under any
environmental legislation, regulation, notice, circular
or order of any government, governmental, quasi-
governmental, state or local government, supranational,
statutory or other regulatory body, agency, court,
association or any other relevant person or body in any
relevant jurisdiction; or
(iii) a person, persons or class or classes of person could
reasonably be expected to have any claim or claims in
respect of any product or process of manufacture or
materials used therein now or previously manufactured, sold
or carried out by any past or present member of the Wider
National Grid Group or the Wider Lattice Group, as the case
may be, which claim or claims would materially and adversely
affect the Wider National Grid Group or the Wider Lattice
Group, as the case may be.
3. Subject to the requirements of the Panel, National Grid and
Lattice, acting together, may waive all or any of the conditions
contained in paragraphs 2(a) to (l) (inclusive). National Grid
reserves the right to waive, in whole or in part, all or any of the
conditions in paragraphs 2(m), (p) and (q) above, so far as they
relate to Lattice, and in paragraph 2(o) above, and Lattice
reserves the right to waive, in whole or in part, all or any of the
conditions in paragraphs 2(m), (p) and (q) above, so far as they
relate to National Grid, and in paragraph 2(n) above, for the
purposes of the Merger and the Scheme.
4. Save with the consent of the Panel, the Merger will lapse and the
Scheme will not proceed if, before the date of the Court Meeting:
(i) the European Commission initiates proceedings under Article
6(1)(c) of the Merger Regulation; or
(ii) there is a reference to the Competition Commission whether
following a referral to a competent authority in the UK under
Article 9(1) of the Merger Regulation or otherwise.
Appendix 2
INFORMATION ON NATIONAL GRID
National Grid is an international networks business. Its principal
activities are the ownership, operation and development of the high-
voltage transmission network in England and Wales and electricity
transmission and distribution networks serving approximately 3.2 million
electricity customers and 0.5 million gas customers in the North East
US. National Grid also operates interconnectors between England and
Wales and each of France and Scotland and between the US and Canada. It
is also developing an interconnector in Australia and has interests in
transmission networks in Argentina and Zambia with joint venture
partners.
In addition, the National Grid Group's telecommunications interests
comprise its 32.5 per cent. economic interest in Energis, and joint
ventures in Poland and Latin America. It also has wholly owned
infrastructure services businesses in the UK and the US.
Summary financial information extracted, without material adjustment,
from National Grid's results for the years ended 31 March 2000 and 31
March 2001 is set out in the table below:
(in pounds sterling)
2001 2000
Group turnover 3,799.7 m 1,614.7m
Total operating profit (1) 731.9 m 546.5m
Total assets 9,982.6m 8,766.8m
Equity shareholders' funds 3,475.8m 2,909.0m
Note (1): Before exceptional items and goodwill amortisation
National Grid completed the acquisition of Niagara Mohawk Holdings,
Inc., on 31 January 2002. Niagara Mohawk's principal activities are the
delivery of electricity and natural gas in New York State. Due to the
recent nature of the acquisition, Niagara Mohawk is not represented in
the summary financial information detailed above. Summary financial
information under US GAAP, extracted without material adjustment from
Niagara Mohawk's annual reports for 31 December 1999 and 31 December
2000 is set out in the table below:
(in pounds sterling)
2000 1999
Operating revenues 4,539.3m 4,084.2m
Operating income 429.8m 528.8m
Total assets 12,642.3m 12,670.4m
Common stockholder equity 2,675.1m 2,976.1m
Appendix 3
INFORMATION ON LATTICE
The majority of Lattice's turnover is generated through Transco.
Transco is the owner and operator of the vast majority of Britain's gas
transportation system. Transco transports gas for approximately 60
customers known as gas "shippers". Gas is received at seven coastal
terminals and transported via 6,400 km of high pressure pipelines and
275,000 km of lower pressure (local transmission) and distribution
pipelines to the meters of industrial, commercial and domestic customers
and to third party gas transportation systems. The gas transmission
system is connected to continental Europe via the interconnector
pipeline from Bacton to Zeebrugge in Belgium. Gas is also transported
to Belfast and Dublin via the interconnector at Moffat in Scotland. As
well as transporting gas, Transco is responsible for the safety,
development and maintenance of the pipeline system.
In addition, Lattice owns a number of ancillary businesses, including
SST which builds, leases and operates sites for the base stations and
radio masts needed by mobile telephone operators and 186k which owns and
manages a fibre-optic network of nearly 2,000km connecting 20 centres of
demand.
(all amounts in pounds sterling)
2001 2001 2000
Excluding NTS(1) Additional NTS Including NTS
Entry capacity entry capacity entry capacity (as restated((2)
Auction turnover auction turnover turnover
Group turnover 3,150m 143m 3,293m 3,087m
Total operating 1,063m 143m 1,206m 1,178m
Profit (3)
Total assets (4) 9,220m 8,439m
Equity shareholders' (723)m (1,012)m
Funds (5)
Summary financial information extracted, without material adjustment,
from Lattice's results for the years ended 31 December 2000 and 31
December 2001 is set out in the table above.
Please note that the December 2001 numbers are unaudited due to the year-
end change to 31 March 2002.
Note (1): National Transmission System
Note (2): The 2000 figures have been restated to show comparative
information using the historical cost convention and in accordance with
FRS 19
Note (3): Before exceptional items and goodwill amortisation, including
share of operating losses in joint venture, excluding exceptional items
and including acquisitions
Note (4): Fixed assets plus current assets
Note (5): Before the deduction of any minority interests
Appendix 4
DEFINITIONS
"ADS" an American depositary share, each ADS represents five
National Grid Shares
"Cazenove" Cazenove & Co. Ltd
"Companies Act" the Companies Act 1985, as amended
"Court" the High Court of Justice in England and Wales
"Credit Suisse First" Credit Suisse First Boston (Europe) Ltd.
Boston"
"Electricity Act" the Electricity Act 1989, as amended
"Gas Act" the Gas Act 1986, as amended
"Hoare Govett" Hoare Govett Limited
"JPMorgan" J.P. Morgan plc
"Lattice" Lattice Group plc
"Lattice Court Meeting"the meeting of Lattice Shareholders to be convened by
order of the Court pursuant to section 425 of the
Companies Act, including any adjournment thereof
"Lattice Closing Price"the closing middle market price of a Lattice Share as
derived from the Official List as at 19 April 2002,
being the last business day prior to this announcement
"Lattice Extraordinary the extraordinary general meeting of Lattice to
be convened in General Meeting" connection with
the Merger, including any adjournment thereof
"Lattice Group" Lattice and its subsidiary undertakings and, where
the context permits, each of them
"Lattice Shareholders" registered holders of Lattice Shares
"Lattice Shares" ordinary shares of 10 pence each in the capital of Lattice
"Lattice Share Schemes"the Lattice Sharesave Scheme, the Lattice All-Employee
Share Ownership Plan, the Lattice Long Term Incentive
Scheme, the Lattice Short Term Incentive Scheme, the
deed of allocation made between Lattice, Mourant and
Co Trustees Limited and Colin Stephen Matthews dated
12 December 2001, the replacement BG Executive Share
Option Scheme, the BG Group Employee Profit Sharing
Scheme and the Spectrasite Transco Communications
Limited Executive Share Option Scheme
"Lattice Special Share"the special rights non-voting redeemable preference
share of 10 pence in the capital of Lattice held
by the Special Shareholder
"Listing Rules" the listing rules of the UK Listing Authority made under
section 74 of the Financial Services and Markets Act 2000
"London Stock Exchange"London Stock Exchange plc
"Merged Group" National Grid Transco plc and its subsidiary undertakings
following the Merger and, where the context permits, each of
them
"Merger" the proposed merger of National Grid and Lattice as described
in this announcement
"Merrill Lynch" Merrill Lynch International
"National Grid" National Grid Group plc
"National Grid
"Closing Price" the closing middle market price of a National Grid Share as
derived from the Official List as at 19 April 2002, being the
last business day prior to this announcement
"National Grid
Extraordinary General
Meeting" the extraordinary general meeting of National Grid to be
convened in connection with the Merger, including any
adjournment thereof
"National Grid
Final Dividend" the final dividend of 9.58 pence per National Grid Share
payable to National Grid Shareholders in respect of the
financial year ended 31 March 2002
"National Grid Group" National Grid and its subsidiary undertakings and,
where the context permits, each of them
"National Grid
Shareholders" registered holders of National Grid Shares
"National Grid Shares" ordinary shares of 10 pence each in the capital
of National Grid
"National Grid Share
Schemes" the National Grid Executive Share Option Plan 2002,
National Grid Employee Share Ownership Plan 2002 and
the associated UK Trust, National Grid Savings Related
Share Option Plan 2002, National Grid Employee Stock
Purchase Plan 2002, National Grid Share Matching Plan
2002, National Grid USA Incentive Thrift Plans I and II,
National Grid Employee Trust 2002 and National Grid
Qualifying Employee Share Ownership Trust (No. 2) 2002
"National Grid Transco"National Grid Transco plc
"National Grid Transco
Shareholders" registered holders of National Grid Transco Shares
"National Grid Transco
Shares" ordinary shares of 10 pence each in the capital of National
Grid Transco
"New National Grid
Transco Shares" ordinary shares of 10 pence each in the capital of National
Grid to be issued to Lattice Shareholders at the relevant
record date pursuant to the Scheme
"Ofgem" or "Gas and
Electricity Markets
Authority" the Authority established under section 1 of the Utilities Act
2000
"Official List" the Official List of the UK Listing Authority
"Panel" the Panel on Take-overs and Mergers
"PUHCA" the United States Public Utility Holding Company Act of 1935,
as amended
"Rothschild" N M Rothschild and Sons Limited
"Scheme" or "Scheme
of Arrangement" the scheme of arrangement to be made under section 425
of the Companies Act between Lattice, the holder of the
Lattice Special Share and the holders of the Lattice
Shares at the relevant date
"SEC" the United States Securities and Exchange Commission
"Secretary of State" the UK Secretary of State for Trade and Industry
"Special Shareholder" the holder of the Lattice Special Share, being
currently the Secretary of State
"Transco" Transco plc
"UK Listing Authority" United Kingdom Listing Authority
"UK Trust" the Rules and Trust Deed of the National Grid
Employee Share Ownership Plan 2002 (UK Plan)
"Wider Lattice Group" Lattice and any of its subsidiaries or subsidiary
undertakings or associated undertakings and any
other body corporate, partnership, joint venture
or person in which Lattice and such undertakings
(aggregating their interests) have an interest of
20 per cent. or more of the voting or equity
capital or the equivalent
"Wider National
Grid Group" National Grid and any of its subsidiaries or
subsidiary undertakings or associated undertakings
and any other body corporate, partnership, joint
venture or person in which National Grid and such
undertakings (aggregating their interests) have an
interest of 20 per cent. or more of the voting or
equity capital or the equivalent
22 April 2002
National Grid Announces Cost Savings, Board Change and Final Dividend
Further to today's joint announcement by National Grid Group plc
("National Grid") and Lattice Group plc ("Lattice") that the Boards of
both companies have unanimously agreed the terms of a recommended merger
of equals to form National Grid Transco, National Grid announces:
UK Cost Savings
At its preliminary results in May 2001, National Grid announced that it
would aim to reduce controllable costs in its UK Transmission Owner
business by 20per cent in real terms over the term of its price review
which ends in March 2006, modestly outperforming the targets set by
Ofgem.
Following an extensive review of the UK business processes, National
Grid is now able to increase this target to 30 per cent delivering a
further 80 million pounds sterling of cost savings over the current
price review period.
Steve Holliday, Group Director Europe said, "This is further proof of
our ability to continue to cut costs after the excellent record over the
last ten years. I look forward to working with Lattice to exchange best-
practice abilities in this area."
Board Change
The Board announces Stephen Box's intention to retire, through reasons
of ill health, as a Director of National Grid on completion of the
merger between National Grid and Lattice.
James Ross said, "I would like to thank Stephen on behalf of all at
National Grid for his enormous contribution to the Group's success. We
will be sad to see him leave and we wish him all good fortune on his
retirement."
Final Dividend
The Board is recommending a final dividend of 9.58 pence per share to be
paid on 15 August 2002 to shareholders on the register on 7 June 2002.
This brings the total dividend for the year to 16.04 pence per share in
line with our target to increase dividends by 5 per cent real in each
year to March 2006.
Cautionary statement
This announcement contains certain statements that are neither reported
financial results nor other historic information. These statements are
"forward looking statements" within the meaning of the safe-harbour
provisions of the U.S. federal securities laws. Because these forward-
looking statements are subject to risks and uncertainties, actual future
results may differ materially from those expressed in or implied by the
statements. Many of these risks and uncertainties relate to factors
that are beyond the companies' ability to control or estimate precisely,
such as future market conditions, currency fluctuations, the behaviour
of other market participants and the actions of governmental regulators.
Other factors that could cause actual results to differ materially from
those described in this announcement include: the ability to integrate
Lattice successfully within the National Grid Group or to realise
synergies from such integration or the failure to retain key management
and other risk factors detailed in National Grid's reports filed with
the SEC or in material furnished to the SEC by National Grid or Lattice.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date of this
announcement. The companies do not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this announcement.
ENQUIRIES:
National Grid:
Investors
Marcy Reed 44 207 312 5779 44 776 849 0807(m)
Terry McCormick 44 207 312 5785 44 776 804 5139(m)
Louise Clamp 44 207 312 5783 44 776 855 5641(m)
Media
Clive Hawkins 44 207 312 5757 44 783 635 7173(m)
Citigate Dewe Rogerson: 44 207 638 9571
Anthony Carlisle 44 797 361 1888(m)
National Grid Group plc David C. Forward
Assistant Secretary
April 22, 2002
US Securities and Exchange Commission
450 Fifth Street, N.W.,
Washington, D.C. 20549
Dear Ladies and Gentlemen:
Re: National Grid Group plc (`National Grid') Form 6-k for
April 2002
-------------------------------------------------------
Please find enclosed a Form 6-K Report in respect of an
announcement about Merger of National Grid and Lattice which is being
furnished to you under the Securities Exchange Act of 1934.
One copy of the Form 6-K Report is also being furnished to the New
York Stock Exchange with a copy of this letter.
Very truly yours,
s/David C. Forward
David C. Forward
Assistant Secretary