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FirstEnergy Corp. And GPU Inc. Announce Merger

AKRON, OH, and MORRISTOWN, NJ-FirstEnergy Corp. and GPU Inc. have announced that both companies’ boards of directors have unanimously approved a definitive merger agreement under which FirstEnergy would acquire all of the outstanding shares of GPU’s common stock for approximately $4.5 billion in cash and FirstEnergy common stock. FirstEnergy also would assume approximately $7.4 billion of GPU’s debt and preferred stock. The combined company would have an equity value of approximately $8.5 billion, based upon the closing stock price on August 4, 2000, of $26.94 per FirstEnergy share.

The transaction would be accounted for as a purchase, and is expected to be accretive to FirstEnergy’s earnings per share and cash flow immediately upon its completion. The companies expect that the transaction can be completed within 12 months. Financing for the transaction is expected to come from a combination of long-term debt and bank credit lines.

Under the agreement, GPU shareholders would receive the equivalent of $36.50 for each share of GPU common stock they own, payable in cash or in FirstEnergy common stock, so long as FirstEnergy’s common stock price is between $24.24 and $29.63. Each GPU shareholder would be able to elect the form of consideration they wish to receive, subject to proration so that the aggregate consideration to all GPU shareholders will be 50 percent cash and 50 percent FirstEnergy common stock. Each GPU share converted into FirstEnergy common stock would receive not less than 1.2318 and not more than 1.5055 shares of FirstEnergy common stock, depending on the average closing price of FirstEnergy stock during the 20-day trading period ending on the sixth trading day prior to the merger closing. For example, based on FirstEnergy’s closing price of $26.94 on August 4, 2000, GPU shareholders who choose to receive common stock would receive 1.355 FirstEnergy shares for each GPU share. The stock portion of the consideration is expected to be tax free to GPU shareholders. Each GPU share may also be converted into $36.50 in cash, also subject to proration.

The combination of FirstEnergy and GPU would create the nation’s sixth largest investor-owned electric system, based on customers served. As of June 30, 2000, the combined revenues of FirstEnergy and GPU for the previous 12 months totaled $12.0 billion and assets of the companies totaled $38.6 billion.

The combined company’s principal electric utility operating companies would include FirstEnergy’s Ohio Edison Co. and its Pennsylvania Power Co. subsidiary, The Cleveland Electric Illuminating Co., and Toledo Edison Co., as well as GPU Energy’s electric utility operating companies-Jersey Central Power & Light Co., Metropolitan Edison Co., and Pennsylvania Electric Co., which serve customers in Pennsylvania and New Jersey.

Together, these companies serve approximately 4.3 million customers within 37,200 square miles of Ohio, Pennsylvania and New Jersey. In addition, the combination would make FirstEnergy’s mechanical contracting and construction business the fourth largest in the nation, with annual revenues of approximately $1 billion and 3,800 employees.