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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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EL PASO CORPORATION
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NEWS [LOGO - EL PASO]
For Immediate Release
EL PASO CORPORATION EXPRESSES HEIGHTENED CONCERN OVER ZILKHA/WYATT'S
IMPLICIT THREAT TO DISRUPT ITS CALIFORNIA SETTLEMENT
HOUSTON, TEXAS, JUNE 9, 2003--El Paso Corporation (NYSE: EP), in a letter
mailed to shareholders today, reiterated its concern over the implicit
threat made by Zilkha/Wyatt last week to disrupt the company's California
settlement.
Over the past few months El Paso's Board and management worked
painstakingly to reach a settlement of litigation relating to the Western
energy crisis that we believe is in the best interests of the company and
our shareholders. We believe that the settlement is broadly supported by
our shareholders.
The Zilkha/Wyatt slate recently characterized this settlement as
"unfathomable" and "unconscionable," implying that they may seek to undo
the settlement. When asked directly by an analyst to state their
intentions, Zilkha/Wyatt made it clear they would review the settlement if
elected, a statement that they subsequently repeated to news media.
In addition to being broadly supported by El Paso shareholders, industry
analysts have expressed strong support for the settlement:
"Though we have never been convinced of the case against El Paso, we
believe ...[the settlement] removes a material overhang off [El Paso]
that should substantially facilitate its ability to get back on its
feet quickly ...[W]e view...the terms of the deal as very attractive
under the circumstances at hand."(1)
- Ronald Barone, UBS Warburg, 3/21/03
"The settlement removes the most significant overhang facing the
company...With this issue likely behind the Company we believe
management has more time to focus their efforts on turning around the
Company."(1)
- John Edwards, Deutsche Bank, 3/24/03
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(1) Permission to use quotes neither sought nor received.
Shareholders and analysts broadly support this settlement, but Zilkha/Wyatt
say they want to review it, and implicitly are threatening that they may
derail the settlement. In our view, this threat reflects Zilkha/Wyatt's
fundamental lack of understanding of the importance of this settlement for
our company and the major risks and uncertainties that would result if the
settlement were not completed. Equally, it demonstrates the major risks
associated with the election of the Zilkha/Wyatt slate.
Shareholders who want to see this important settlement completed should
sign the WHITE proxy card to support El Paso's nominees.
The text of El Paso's entire shareholder letter follows:
Dear Fellow El Paso Shareholder:
The Board and management of El Paso have made substantial progress
implementing our plan to restore and enhance the value of the company. We
believe the great strides we have made are proof positive of your current
Board's commitment and ability to position El Paso for the future. Do not
let the dissidents take control of your company and stop the progress El
Paso has enjoyed.
With the Annual Meeting of Shareholders less than two weeks away, it
is important that you act now to protect your interests. We urge you to
sign, date and return the enclosed WHITE proxy card. A postage-paid
envelope is enclosed for your convenience. TIME IS GROWING SHORT--PLEASE
ACT TODAY.
LOOKING FORWARD TO THE FUTURE
The company has achieved many of the important goals of our 2003
operational and financial plan and we are taking further actions to enhance
the value of the company. El Paso has:
o Announced a target of more than $400 million of costs savings and
business efficiencies to be met by end of 2004
o Laid out an aggressive $10 billion debt reduction plan
o Conducted a long-term strategic planning process to generate free
cash flow and improved earnings
El Paso has made substantial changes in the company's leadership and
culture including:
o A reconstituted board of directors that
o Is independent and highly experienced
o Has been strengthened by the addition of four highly qualified
energy industry CEOs and CFOs
o Is knowledgeable about current operations of El Paso's businesses
o Has learned from past mistakes
o Is committed to maximizing value and a process of change.
o A new leaner executive management team with changes at the
highest levels and
o An active search to recruit a world-class CEO
o In discussions with five highly qualified candidates
o Prompt decision after conclusion of proxy fight
o Candidates clearly superior to Zilkha/Wyatt hand-picked CEO
choice, Stephen Chesebro', based on current employment experience
as senior executives of major energy companies
The progress we have made on the plan reflects our commitment and
ability to lead El Paso into the future. In our view, El Paso's share
price, which has almost tripled since February, reflects investors'
recognition of the company's progress.
We believe the Zilkha/Wyatt proxy contest poses a clear threat to that
progress. El Paso's concerns about the Zilkha/Wyatt slate include:
o Zilkha/Wyatt's implicit threat to derail El Paso's California
settlement;
o Zilkha/Wyatt's so called "business plan," which El Paso believes
is uninformed, unworkable and value destructive;
o Their selection of Stephen Chesebro'--who has not been actively
employed since 1999--as CEO;
o The risks inherent in a complete change in the Board of
Directors;
o The role of Oscar Wyatt and his selection of their entire slate;
and
o The risk of significant management disruption.
Threat to derail the California settlement
As part of their presentation to analysts on June 4, 2003, the
Zilkha/Wyatt slate described El Paso's proposed settlement of claims
relating to the Western energy crisis as "unfathomable" and
"unconscionable," implying that, if elected, the Zilkha/Wyatt slate would
seek to undo a settlement that El Paso believes:
o Is in the best interests of its investors;
o Will eliminate the most significant risk and uncertainty
affecting the company's future; and
o Is broadly supported by its shareholders.
El Paso believes Zilkha/Wyatt's implicit threat to back away from the
settlement if their slate is elected is utterly opposed to the best
interests of El Paso shareholders and demonstrates a fundamental lack of
understanding of this critical issue.
Shareholders who agree with El Paso's decision to settle this
litigation should execute the WHITE proxy card to support El Paso's
nominees.
Zilkha/Wyatt Alchemy
After refusing to spell out a detailed plan for El Paso for almost
four months on the grounds that they lacked the information to do so,
Zilkha/Wyatt have belatedly decided to offer up their own so-called
"business plan." We believe they were right the first time: they do not
have enough knowledge about El Paso to develop a detailed plan. Even now,
many elements remain unclear, but a cornerstone of that "plan" is their
idea to reduce annual capital expenditures to less than $1 billion while
generating sufficient cash to pay down debt substantially. Zilkha/Wyatt
call this "math"; we call it alchemy.
To maintain El Paso's current exploration and production levels, and
to fund pipeline maintenance capital expenditures and committed expansions,
almost $2 billion per year of capital is required. We believe that a
capital expenditure program of less than $1 billion is imprudent and value
destructive to the E&P and pipeline businesses, will reduce earnings and
cash flow, impede the company from pursuing attractive investment
opportunities and would not result in an ongoing debt reduction program.
Shareholders who want a detailed, achievable business plan and a
realistic approach to debt reduction, not Zilkha/Wyatt's alchemy, should
execute the WHITE proxy card to support El Paso's nominees.
Concerns about Oscar Wyatt's influence over the Zilkha/Wyatt Slate
El Paso has been seeking to collect a debt of $2.5 million plus
interest from Oscar Wyatt for a number of months. Mr. Wyatt has refused to
pay, compelling El Paso to commence litigation, and even sought to delay
that litigation, asserting that, if the Zilkha/Wyatt slate is elected, "the
new board will need sufficient time to review all the facts and
circumstances, including whether to change counsel or otherwise resolve
this matter." The Zilkha/Wyatt slate has repeatedly refused to clarify
whether, if elected, it intends to collect this debt. At the Zilkha/Wyatt
slate's June 4 analyst meeting, the slate deferred questions regarding the
litigation to Mr. Wyatt. Mr. Wyatt told analysts "I'm collectible, so we
will try [the case] if they keep coming."
We continue to question the extent of Mr. Wyatt's influence over the
members of the Zilkha/Wyatt slate and whether this group will act in an
independent manner towards Mr. Wyatt in connection with the many conflicts
that exist between El Paso and Mr. Wyatt and his Nucoastal energy company.
Shareholders who want a Board of Directors that is unquestionably
independent of Oscar Wyatt should execute the WHITE proxy card to support
El Paso's nominees.
Take a look and compare the El Paso nominees to the Zilkha/Wyatt
slate.
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Issue El Paso Zilkha/Wyatt
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Business Plan Detailed business plan Uninformed critique of
developed over months El Paso's plan: will
of business planning not generate improved
earnings or
meaningfully reduce
debt
Being implemented now Progress stops.
Requires significant
time to develop
Achieving results now Results uncertain
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Vision for the future Continue current Start over
progress
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California settlement Settle on terms that Implicit threat to
allow El Paso to derail settlement
eliminate major risk
and uncertainty
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CEO Search Careful search process No search process;
to choose the best settle for a former
candidate from current energy executive with
active senior less than 8 months
executives of major experience as a public
energy companies company CEO who
recommended by a o has not been
leading search firm actively employed
since 1999
o since 1999, has held
only one public
company directorship,
at a small oil and gas
company where he is a
non-employee chairman
ohas not been
recommended for an
executive position by
two major search firms
in more than eight
years
o opposed $84/ share
takeover bid for
Pennzoil, saying it
"doesn't adequately
value Pennzoil's
international oil and
gas properties" --
Pennzoil was later
broken up and sold for
$38/share
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Director Independence 11 directors are Nominees selected by
independent Oscar Wyatt
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Directors with detailed Twelve None
current knowledge of
El Paso
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El Paso believes that its shareholders should have serious concerns
about replacing El Paso's entire board in light of the company's
substantial progress with its turnaround effort and the significant
questions surrounding the Zilkha/Wyatt slate.
The Board of Directors urges El Paso shareholders to vote FOR the
election of El Paso's slate of 12 highly qualified directors on El Paso's
WHITE proxy card, NOT to sign the blue proxy card sent to you by Messrs.
Zilkha and Wyatt and to DISCARD any blue proxy card they may send to you in
the future. Your vote is critical, no matter how many shares you own. Time
is short as the June 17 Annual Meeting is rapidly approaching.
El Paso shareholders who have any questions about voting their proxy
or need additional information about El Paso or the stockholders meeting,
please contact MacKenzie Partners, Inc. at (800) 322-2885 or visit El
Paso's Web site at www.elpaso.com.
Sincerely,
/s/
RONALD L. KUEHN, JR.
Chairman and Chief Executive Officer
El Paso Corporation is the leading provider of natural gas services and the
largest pipeline company in North America. The company has core businesses
in pipelines, production, and midstream services. Rich in assets, El Paso
is committed to developing and delivering new energy supplies and to
meeting the growing demand for new energy infrastructure. For more
information, visit www.elpaso.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This release includes forward-looking statements and projections, made in
reliance on the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The company has made every reasonable effort to ensure
that the information and assumptions on which these statements and
projections are based are current, reasonable, and complete. However, a
variety of factors could cause actual results to differ materially from the
projections, anticipated results or other expectations expressed in this
release, including, without limitation, our ability to attract and retain
qualified members of the Board of Directors; the successful recruitment and
retention of a qualified CEO; the successful implementation of the 2003
operational and financial plan; the successful implementation of the
settlement related to the Western Energy Crisis; material and adverse
impacts from our proxy contest with Selim Zilkha/Oscar Wyatt; actions by
the credit rating agencies; the successful close of financing transactions;
our ability to successfully exit the energy trading business; our ability
to divest of certain non-core assets; changes in commodity prices for oil,
natural gas, and power; general economic and weather conditions in
geographic regions or markets served by El Paso Corporation and its
affiliates, or where operations of the company and its affiliates are
located; the uncertainties associated with governmental regulation;
political and currency risks associated with international operations of
the company and its affiliates; inability to realize anticipated synergies
and cost savings associated with restructurings and divestitures on a
timely basis; difficulty in integration of the operations of previously
acquired companies, competition, and other factors described in the
company's (and its affiliates') Securities and Exchange Commission filings.
While the company makes these statements and projections in good faith,
neither the company nor its management can guarantee that anticipated
future results will be achieved. Reference must be made to those filings
for additional important factors that may affect actual results. The
company assumes no obligation to publicly update or revise any
forward-looking statements made herein or any other forward-looking
statements made by the company, whether as a result of new information,
future events, or otherwise.
ADDITIONAL IMPORTANT INFORMATION
To the extent that individual customers, independent industry researchers,
financial analysts, or El Paso commissioned research are quoted in this
document, it is El Paso's policy to use reasonable efforts to verify the
source and accuracy of the quote. El Paso has not, however, sought or
obtained the consent of the quoted source to the use of such quote as proxy
soliciting material. This document may contain expressions of opinion and
belief. Except as otherwise expressly attributed to another individual or
entity, these opinions and beliefs are the opinions and beliefs of El Paso.
CONTACTS
Communications and Government Affairs
Norma F. Dunn, Senior Vice President
Office: (713) 420-3750
Fax: (713) 420-3632
Investor Relations
Bruce L. Connery, Vice President
Office: (713) 420-5855
Fax: (713) 420-4417
Alternate Contacts
Joele Frank/Dan Katcher
Office: (212) 355-4449
Fax: (212) 355-4554