NIMO STOCKHOLDERS FACE CHANGES
Syracuse Herald American; Syracuse, N.Y.; Sep 10, 2000;

If National Grid Group of London completes its $3 billion deal to buy Syracuse-based Niagara Mohawk Holdings Inc., NiMo shareholders who opt to keep stock in the new company can expect to deal with some new terminology and a few other changes.

National Grid has offered to pay Niagara Mohawk shareholders the equivalent of $19 a share. NiMo's 52-week high was $16.19 a share as of the Friday before the sale announcement. It closed at $15.63 Friday.

The British firm proposes that at least a third of the purchase price - $1 billion - be paid in cash, with the rest coming as stock in National Grid.

If regulatory agencies and shareholders of both companies approve the deal, Niagara Mohawk shareholders would have to designate whether they want cash or National Grid American depositary shares in return for their Niagara Mohawk stock, said a spokesman for National Grid.

American depositary shares entitle the investor to all dividends and capital gains, which are managed and distributed by a bank or brokerage custodian for a fee. An American depositary share is the equivalent of five shares of the company's stock in London.

Because National Grid trades on the New York Stock Exchange as American depositary receipts and because most investors already work through a brokerage or a bank trust department acting as a custodian of shares, the change from NiMo stock should be relatively seamless, said Jim Burns, president of J.W. Burns & Co. Investment Counsel in Syracuse.

His company does not follow utilities but does follow other foreign companies that trade as American depositary receipts, or ADRs, which are established investment tools.

"The world is smaller, and ADRs have been around for a long time," he said.

Niagara Mohawk investors considering what to do with their stock should be most interested in the prospects for National Grid, Burns said.

"Shareholders should begin to focus their attention on the new company," Burns said.

Over the past two years National Grid's balance sheet has been stronger than Niagara Mohawk's. The Syracuse-based utility recorded losses in 1998 and 1999 as it absorbed costs related to the Power Choice rate agreement, ended some costly contracts with independent power producers and paid down debt.

But all those moves made NiMo more attractive to potential buyers like National Grid.

Niagara Mohawk's second quarter report said the company expects to break even this year, said Leon Mazur, director of investor relations.

Earnings for the British company, meanwhile, have been growing by 1 to 2 percent a year and the firm has been paying dividends. NiMo has not paid a dividend since 1995.

National Grid's performance on the London stock exchange now has some significance for NiMo stockholders because the purchase offer specifies that the price of $19 a share is good only as long as National Grid American depositary shares remain between $32.50 and $51 a share in London. If the price drops below that range, known as a collar, or grows beyond it by the time the deal closes next year, a multiplier kicks in to lower or raise the $19-a-share offer, a National Grid spokesman said.

A detailed explanation of how that would be calculated will be included in a proxy statement that'll be sent to all shareholders before they have to vote on the deal, Mazur said.

The collar seems to be set well beyond the price range where the British company has been trading - $34 to $48.25 on the New York Stock Exchange over the past year.

The price of National Grid ADRs on the NYSE pretty closely follows the London exchange, Mazur said.

"I don't think it's going to vary that much," he said.

Information about ADRs and foreign investments is available through the SEC pamphlet "International Investing: Get the Facts." It can be found on the Internet at www.sec.gov under the Investor Assistance & Complaints category. Click on Learn About Investing and use the search function for ADR to get to the brochure.

Annual reports from Niagara Mohawk and National Grid can be found on the company sites www.nimo.com and www.nationalgrid.com

Burns suggests a financial adviser who knows how to find and decipher financial reports and analyses of foreign firms can come in handy.

The SEC requires a utility such as National Grid to file an annual report - as do all U.S. companies that sell stock. They also must file any interim financial reports required by their homeland, said SEC spokesman John Heine, but they do not need to file quarterly as U.S. firms do. The SEC does not require foreign firms to file electronically.

Financial reports can be made in any format that conforms to generally accepted accounting practice, Heine said. Any part that doesn't match U.S. standards should be covered in a section labeled reconciliation, he said.

In general, far less information is made public about foreign companies than about firms based in the United States, said Harjit K. Arora, professor of economics at Le Moyne College.

"We have the most open country now," she said.