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MERGER RELATED ACTIVITIES
6 Months Ended
Jun. 30, 2013
Business combinations [Abstract]  
MERGER RELATED ACTIVITIES

NOTE 2.       MERGER RELATED ACTIVITIES

 

MidAmerican Merger

 

On May 29, 2013, NVE entered into the MidAmerican Merger Agreement. The MidAmerican Merger Agreement provides for the merger of Silver Merger Sub, Inc. with and into NVE, with NVE continuing as the surviving corporation in the MidAmerican Merger. Once merged, NVE will become an indirect wholly owned subsidiary of MEHC. The closing is expected to occur during the first quarter of 2014.

Pursuant to the MidAmerican Merger Agreement, at the effective time of the MidAmerican Merger, each share of common stock of NVE issued and outstanding immediately prior to the closing will be converted into the right to receive cash in the amount of $23.75 per share, without interest and subject to applicable withholding taxes.

 

`       The MidAmerican Merger Agreement has been approved by the BOD of both NVE and MEHC, but the consummation of the MidAmerican Merger is subject to the satisfaction or waiver of specified closing conditions, including:

the approval of the MidAmerican Merger by the holders of a majority of the outstanding shares of NVE common stock (NVE filed a preliminary proxy statement with the SEC in July 2013);

the receipt of regulatory approvals and other consents required to consummate the MidAmerican Merger, including, among others, approvals from the PUCN and the FERC on terms and conditions specified in the MidAmerican Merger Agreement (in July 2013, filings were made with the PUCN and FERC. See Note 4, Regulatory Actions, for further details of these filings);

the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On July 22, 2013, NVE was advised that the Department of Justice and the U.S. Federal Trade Commission had terminated the applicable waiting period under the Hart-Scott-Rodino Act. Consequently, the closing condition with respect to the Hart-Scott-Rodino Act has been satisfied;

the absence of the occurrence of a company material adverse effect (as defined in the MidAmerican Merger Agreement) after the date of the MidAmerican Merger Agreement; and

other customary closing conditions.

The MidAmerican Merger Agreement contains customary representations, warranties and covenants for both NVE and MEHC. These covenants include an obligation for us, subject to certain exceptions, to conduct our business in a manner substantially consistent with our current practice.  In addition, the covenants contain several restrictions that apply unless MEHC's consent is received, including limitations on making certain business acquisitions, limitations on our total capital spending, limitations on the extent to which we may obtain financing through long-term debt or equity issuances or limitations on increasing our common stock dividend payout. 

 

The MidAmerican Merger Agreement contains certain termination rights and fees for both NVE and MEHC. In the event of termination of the MidAmerican Merger under certain circumstances, NVE may be obligated to pay MEHC a termination fee of up to $169.7 million.

 

During the three and six month periods ending June 30, 2013, NVE incurred $13.6 million (pre-tax) of merger related fees and stock compensation costs related to the MidAmerican Merger which have been expensed and presented on the Statement of Comprehensive Income as Merger Related Costs. Stock compensation costs increased primarily due to the increase in the average price per share of NVE common stock used to value the liability for stock compensation, upon announcement of the MidAmerican Merger. NVE expects to incur additional merger fees relating to the MidAmerican Merger, as well as, upon consummation of the MidAmerican Merger.

 

As a result of the pending MidAmerican Merger, NVE, its directors, Silver Merger Sub, Inc. and, in some cases, MEHC, have been named as defendants in certain lawsuits brought by alleged NVE shareholders seeking, among other things, to enjoin the proposed MidAmerican Merger; see Note 8, Commitments and Contingencies for further details. In addition, NVE has ceased the repurchase of any common stock for NVE stock compensation plans; see Note 10, Common Stock and Other Paid-In Capital.

 

The MidAmerican Merger will accelerate the vesting and settlement of equity compensation awards to executives and employees which will be cashed out upon consummation of the MidAmerican Merger. Certain executives are also entitled to additional change of control payments in the event of an occurrence of a qualified termination. The consummation of the MidAmerican Merger will also trigger mandatory redemption requirements under financing agreements of NVE and the Utilities. As a result, NVE, NPC and SPPC will be required to offer for purchase approximately $315.0 million, $3.1 billion, and $951.7 million, respectively, of debt at 101% of par within 10 days after the MidAmerican Merger closing. At this time, NVE and the Utilities are unable to determine the extent to which holders of these debt securities will accept such tender offers. The average interest rate under these debt securities is approximately 6.25%, 6.42% and 6.05% for NVE, NPC and SPPC, respectively. To the extent that debt securities are tendered pursuant to the required tender offers, NVE and the Utilities intend to fund the purchases using a combination of internal funds, the Utilities' revolving credit facilities or the issuance of long-term debt. Furthermore, NVE and the Utilities are required to obtain consents from lenders under the terms of the Utilities' revolving credit facilities and NVE's term loan before consummating the MidAmerican Merger.

 

One Company Merger between NPC and SPPC

 

       As detailed further in Note 4, Regulatory Actions, NPC and SPPC filed a joint application with the PUCN to merge SPPC into NPC (“One Company Merger”) and to call the surviving entity NVEOC. The One Company Merger is subject to approval by the PUCN and FERC.