<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
/X/ Definitive Proxy Statement Only(as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
IES INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
MIDAMERICAN ENERGY COMPANY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
August 19, 1996
DEAR IES SHAREHOLDER:
On August 4, 1996, MidAmerican Energy Company proposed a combination with
IES Industries Inc. that would bring much greater value to the shareholders,
customers and employees of both companies and create a strong Iowa-based
utility. In the proposed transaction, IES would merge with MidAmerican or with a
subsidiary of MidAmerican (the "MidAmerican Proposed Merger") and each IES share
would be exchanged, at the option of the IES shareholder, for 2.346 shares of
MidAmerican common stock (with a market value of $37.83 based on the August 16,
1996 closing price of MidAmerican common stock) in a tax-free exchange or $39.00
in cash. If more than 40% of the total IES shares elect to receive cash then a
proration procedure that would be agreed with IES would be applied and persons
electing all cash will receive part cash and part stock based upon such
proration procedure. Any IES shareholder who elects to receive all MidAmerican
common stock in the MidAmerican Proposed Merger will be able to do so.
For the reasons set forth in this letter and the accompanying proxy
statement, we believe the MidAmerican Proposed Merger is financially superior to
the proposed three-way combination (the "Proposed Wisconsin Transaction") of
IES, Interstate Power Company ("Interstate") and WPL Holdings, Inc. ("WPL"),
even in light of the revised terms those companies announced on August 16. We
also believe that MidAmerican and IES now have an extraordinary and timely
opportunity to build on our mutual strengths for the benefit of shareholders,
customers and employees. Our proposal was made to the IES Board of Directors and
requires their support to be presented to you for approval and acceptance. We
urge you to insist that the IES Board support our proposal.
WE URGE YOU TO VOTE AGAINST THE PROPOSED WISCONSIN TRANSACTION AT THE IES ANNUAL
MEETING ON SEPTEMBER 5TH AND PRESERVE YOUR OPPORTUNITY TO CONSIDER THE HIGHER
MARKET VALUE OF THE MIDAMERICAN PROPOSED MERGER. VOTE AGAINST THE WISCONSIN
MERGER AGREEMENT BY SIGNING, DATING AND MAILING THE ENCLOSED BLUE PROXY CARD
TODAY. TIME IS OF THE ESSENCE -- PLEASE ACT TODAY!
Our August 4 proposal is the latest in a series of efforts that we have
made to engage IES management in discussions concerning the benefits of a merger
between IES and MidAmerican. In August 1995 we discussed a possible business
combination
with IES' Chief Executive Officer. Following that discussion, by letters dated
October 3 and October 10, 1995, we attempted to commence a dialogue concerning a
combination, which IES rebuffed. Our efforts culminated in our October 23, 1995
request, in accordance with a 1993 standstill agreement between IES and a
predecessor of MidAmerican, for permission from the IES Board to propose a
business combination between MidAmerican and IES.
<PAGE> 3
IES responded that the IES Board would consider our request. Two weeks later,
however, IES announced that it had entered into an agreement to participate in
the Proposed Wisconsin Transaction.
On August 16, IES announced that it had rejected the MidAmerican Proposed
Merger and would continue to pursue the Proposed Wisconsin Transaction on
amended terms. The MidAmerican Proposed Merger was rejected by the IES Board
without so much as a meeting or phone call, notwithstanding our offer to discuss
our proposal. Now it is time for IES shareholders, the true owners of IES, to
decide. If you want the opportunity to consider the MidAmerican Proposed Merger,
we urge you to make your voice heard by voting AGAINST the Proposed Wisconsin
Transaction.
WE BELIEVE THE MIDAMERICAN PROPOSED
MERGER IS FINANCIALLY SUPERIOR
We believe the MidAmerican Proposed Merger is financially superior.
Consider the following:
- -- GREATER VALUE. Based on closing stock prices for Friday, August 16,
1996, the MidAmerican Proposed Merger would provide IES shareholders a 13%
premium above IES' market price, as compared to only a 7% premium in the
Proposed Wisconsin Transaction. The MidAmerican Proposed Merger, therefore,
would offer a 6% premium ($2.25 per IES share) above the implied value of
the Proposed Wisconsin Transaction. See "Comparison of the
Proposals -- MidAmerican Proposed Merger Premium and Dividend Impact" in
the accompanying Proxy Statement.
- -- HIGHER DIVIDEND. The MidAmerican Proposed Merger would allow IES
shareholders to receive a pro forma annual dividend of $2.82 per IES share,
a 34% increase above IES' current annual dividend rate, based on the ratio
of 2.346 shares of MidAmerican common stock per IES share and MidAmerican's
current annual dividend of $1.20 per share. This compares to the
anticipated pro forma annual dividend of $2.25 in the Proposed Wisconsin
Transaction. The MidAmerican Proposed Merger, therefore, would offer a
dividend which is $0.57 per share, or 25% higher, than in the Proposed
Wisconsin Transaction. IES shareholders will only receive this dividend on
any shares they elect to exchange for MidAmerican common stock. IES
shareholders may elect to exchange all of their shares for MidAmerican
common stock. If they choose not to exchange all of their IES shares for
MidAmerican common shares and instead elect to receive cash, they will not
receive future dividends on shares exchanged for cash but will have the
after-tax cash proceeds from the sale of their IES shares available for
reinvestment. See "Comparison of the Proposals -- MidAmerican Proposed
Merger Premium and Dividend Impact" and "Potential Cost Savings" in the
accompanying Proxy Statement.
- -- CHOICE OF CASH OR STOCK. The MidAmerican Proposed Merger would allow IES
shareholders a choice of cash or, on a tax-free basis, stock in an
Iowa-based company that
<PAGE> 4
we believe will be a stronger and more competitive total energy provider
for Iowa, with an aggressive regional growth strategy. In the MidAmerican
Proposed Merger, each IES share could be exchanged, at the option of the
IES shareholder, for 2.346 shares of MidAmerican common stock (with a
market value of $37.83 based on the August 16, 1996 closing price of
MidAmerican common stock) in a tax-free exchange or $39.00 in cash. If
holders of more than 40% of the total IES shares elect to receive cash then
a pro-ration procedure that would be agreed with IES will be applied and
persons electing all cash will receive part cash and part stock based upon
such proration procedure. Any IES shareholder who elects to receive all
MidAmerican common stock in the MidAmerican Proposed Merger will be able to
do so. See "Comparison of the Proposals -- MidAmerican Proposed Merger
Premium and Dividend Impact" in the accompanying Proxy Statement.
UNLESS THE PROPOSED WISCONSIN TRANSACTION IS DEFEATED AT THE IES ANNUAL MEETING
ON SEPTEMBER 5TH, YOU WILL NOT HAVE THE OPPORTUNITY TO CONSIDER THE MIDAMERICAN
PROPOSED MERGER.
THE MIDAMERICAN PROPOSED MERGER
WOULD CREATE A STRONGER COMPANY
In addition to the substantial financial benefits to IES shareholders, we
believe that the MidAmerican Proposed Merger would create a stronger company.
Among the many advantages of the MidAmerican Proposed Merger would be:
- -- MORE THAN $650 MILLION IN COST SAVINGS. Based exclusively on public
information relating to IES, we have identified aggregate cost savings of
more than $650 million during the first ten years following completion of
the MidAmerican Proposed Merger. As cost savings estimates are necessarily
based upon certain assumptions about the future, there can be no assurance
that the cost savings estimated for either the MidAmerican Proposed Merger
or the Proposed Wisconsin Transaction will be realized in such amounts and
actual cost savings may be more or less than those estimated. See
"Comparison of the Proposals -- Potential Cost Savings" in the accompanying
Proxy Statement.
- -- MIDAMERICAN'S MERGER COMPLETION TRACK RECORD. The MidAmerican Proposed
Merger offers IES shareholders an opportunity to take advantage of
MidAmerican management's proven track record of successfully completing
mergers, including expeditiously obtaining regulatory approvals, so that
shareholders and customers may promptly realize merger related benefits.
See "Introduction" in the accompanying Proxy Statement.
YOUR VOTE IS ESSENTIAL
IF YOU WANT TO HAVE AN OPPORTUNITY TO CONSIDER THE MIDAMERICAN PROPOSED
MERGER, WHICH WE BELIEVE IS FINANCIALLY SUPERIOR TO THE PROPOSED WISCONSIN
TRANSACTION, WE URGE YOU TO VOTE THE BLUE PROXY CARD AGAINST THE PROPOSED
WISCONSIN TRANSACTION.
<PAGE> 5
TIME IS OF THE ESSENCE
IF YOU HAVE ALREADY VOTED FOR THE PROPOSED WISCONSIN TRANSACTION, IT IS NOT
TOO LATE TO CHANGE YOUR VOTE. ONLY YOUR LATEST DATED PROXY CARD WILL COUNT.
SIMPLY SIGN, DATE AND MAIL THE BLUE PROXY CARD TODAY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
THE MIDAMERICAN PROPOSED MERGER IS A PROPOSAL TO THE BOARD OF DIRECTORS OF
IES. EVEN IF THE PROPOSED WISCONSIN TRANSACTION IS NOT APPROVED, A MERGER
AGREEMENT BETWEEN MIDAMERICAN AND IES MAY NOT BE ENTERED INTO. IF SUCH A MERGER
AGREEMENT IS ENTERED INTO, THE TERMS OF SUCH AGREEMENT MAY VARY SUBSTANTIALLY
FROM THE TERMS OF THE MIDAMERICAN PROPOSED TRANSACTION DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT.
Thank you for your consideration and support.
<TABLE>
<S> <C> <C>
Sincerely,
/s/ RUSSELL E. CHRISTIANSEN /s/ STANLEY J. BRIGHT
- ----------------------------- -----------------------------
Russell E. Christiansen Stanley J. Bright
Chairman of the Board President and
Chief Executive Officer
</TABLE>
MidAmerican has filed with the Securities and Exchange Commission a proxy
statement and other materials relating to the solicitation of proxies against
the Proposed Wisconsin Transaction and that proxy statement and the other
materials are incorporated herein by reference.
- -------------------------------------------
-------------------------------------------
IMPORTANT
IF YOUR IES SHARES ARE HELD IN YOUR OWN NAME, PLEASE SIGN, DATE AND
MAIL THE ENCLOSED BLUE PROXY CARD TODAY. IF YOUR SHARES ARE HELD IN THE
NAME OF A BROKERAGE FIRM, ONLY YOUR BROKER CAN VOTE YOUR SHARES AND ONLY
UPON RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. PLEASE CALL AND INSTRUCT YOUR
BROKER TO EXECUTE A BLUE PROXY CARD ON YOUR BEHALF. YOU SHOULD ALSO
PROMPTLY SIGN, DATE AND MAIL YOUR BLUE CARD WHEN YOU RECEIVE IT FROM YOUR
BROKER. PLEASE DO SO FOR EACH SEPARATE ACCOUNT YOU MAINTAIN.
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN VOTING YOUR SHARES,
PLEASE CALL D.F. KING & CO., INC. AT (212) 269-5550 OR MIDAMERICAN TOLL
FREE AT 1-888-776-4692.
- --------------------------------------------------------------------------------
<PAGE> 6
ANNUAL MEETING OF SHAREHOLDERS
OF
IES INDUSTRIES INC.
------------------------
RELATING TO THE PROPOSED MERGER WITH
INTERSTATE POWER COMPANY
AND WPL HOLDINGS, INC.
------------------------
PROXY STATEMENT
OF
MIDAMERICAN ENERGY COMPANY
This Proxy Statement is furnished by MidAmerican Energy Company
("MidAmerican") in connection with its solicitation of proxies to be voted at
the annual meeting of shareholders of IES Industries Inc. ("IES") to be held on
Thursday, September 5, 1996 at Collins Plaza Hotel, 1200 Collins Road N.E.,
Cedar Rapids, Iowa, at 10:00 a.m. local time, and at any adjournments,
postponements or reschedulings thereof (the "Annual Meeting"). This Proxy
Statement is first being mailed to holders of outstanding shares of IES common
stock (the "IES Shares") on or about August 19, 1996.
At the Annual Meeting, holders ("IES Shareholders") of IES Shares of record
at the close of business on July 10, 1996 (the "Record Date") will be voting on
the following matters:
1. A proposal to approve the Agreement and Plan of Merger, dated as of
November 10, 1995, as amended (the "Wisconsin Merger Agreement"), among
Interstate Power Company, a Delaware corporation ("Interstate"), WPL
Holdings, Inc., a Wisconsin corporation ("WPL"), IES, an Iowa corporation,
WPLH Acquisition Co., a Wisconsin corporation and a wholly-owned subsidiary
of WPL ("Acquisition"), and Interstate Power Company, a Wisconsin
corporation and a wholly-owned subsidiary of Interstate ("New Interstate").
The Wisconsin Merger Agreement provides for a three-way business
combination of IES, Interstate and WPL (the "Proposed Wisconsin
Transaction"). The Proposed Wisconsin Transaction is described herein under
"Background of the Solicitation -- The Wisconsin Merger Agreement."
2. A proposal to elect a board of nine directors to serve until the next
annual meeting or until their successors are duly elected and qualified.
3. Such other business as may properly come before the meeting or any
adjournment or postponement thereof.
On August 4, 1996, in a letter to IES, MidAmerican proposed a merger of the
two companies that MidAmerican believes constitutes a superior financial
transaction for IES Shareholders, and a better transaction for IES' employees,
customers and the Iowa communities it serves, than the Proposed Wisconsin
Transaction. Under the MidAmerican proposal, IES would merge with and into
MidAmerican or with a subsidiary of MidAmerican (the "MidAmerican Proposed
Merger"). In the MidAmerican Proposed
THE MIDAMERICAN PROPOSED MERGER IS A PROPOSAL TO THE BOARD OF DIRECTORS OF
IES. EVEN IF THE PROPOSED WISCONSIN TRANSACTION IS NOT APPROVED, A MERGER
AGREEMENT BETWEEN MIDAMERICAN AND IES MAY NOT BE ENTERED INTO. IF SUCH A MERGER
AGREEMENT IS ENTERED INTO, THE TERMS OF SUCH AGREEMENT MAY VARY SUBSTANTIALLY
FROM THE TERMS OF THE MIDAMERICAN PROPOSED TRANSACTION DESCRIBED HEREIN.
(Cover page continued on next page)
<PAGE> 7
(Cover page, continued)
Merger, each IES Share would be exchanged, at the option of the IES Shareholder,
for 2.346 shares of MidAmerican common stock (with a market value of $37.83
based on the August 16, 1996 closing price of MidAmerican common stock) in a
tax-free exchange or $39.00 in cash. If holders of more than 40% of the total
IES Shares elect to receive cash then a proration procedure that would be agreed
with IES will be applied and persons electing all cash will receive part cash
and part stock based upon such proration procedure. Any IES Shareholder who
elects to receive all MidAmerican common stock in the MidAmerican Proposed
Merger will be able to do so.
On August 16, 1996, MidAmerican received a letter from IES stating that the
Board of Directors of IES had rejected the MidAmerican Proposed Merger and that
IES, Interstate and WPL had agreed to revise the Wisconsin Merger Agreement to
increase from 1.01 to 1.14 the number of shares of WPL common stock into which
each IES Share would be converted. According to information published by IES,
IES Shareholders will receive an initial annual cash dividend of $2.25 for each
IES Share under the terms of the revised Wisconsin Merger Agreement.
Management of IES has rejected MidAmerican's repeated attempts to commence
a dialogue concerning the benefits of a merger between IES and MidAmerican and
has thereby refused to let the IES Shareholders realize the benefits of such a
combination. Instead, management of IES has chosen to pursue the Proposed
Wisconsin Transaction, even though, in MidAmerican's view, the Proposed
Wisconsin Transaction offers IES Shareholders less value and lower dividends.
MidAmerican's proposal was made to the IES Board of Directors and requires their
support to be presented to you for approval and acceptance. We urge you to
insist that the IES Board support our proposal.
The purpose of the solicitation made by this Proxy Statement (the "Proxy
Solicitation") is to enable the IES Shareholders, the true owners of IES, to
decide for themselves which proposal is financially superior and to act
accordingly and in their own best interests to preserve their opportunity to
consider the MidAmerican Proposed Merger.
MIDAMERICAN URGES YOU TO VOTE AGAINST THE APPROVAL OF THE WISCONSIN MERGER
AGREEMENT TO PRESERVE YOUR OPPORTUNITY TO CONSIDER THE MIDAMERICAN PROPOSED
MERGER, WHICH MIDAMERICAN BELIEVES IS FINANCIALLY SUPERIOR TO THE PROPOSED
WISCONSIN TRANSACTION.
IF YOU WANT TO HAVE AN OPPORTUNITY TO CONSIDER THE MIDAMERICAN PROPOSED
MERGER, VOTE AGAINST THE APPROVAL OF THE WISCONSIN MERGER AGREEMENT BY SIGNING,
DATING AND MAILING THE ENCLOSED BLUE PROXY CARD. TIME IS OF THE ESSENCE, SO
PLEASE ACT TODAY.
SUBJECT TO COMPLETION
This proxy statement also constitutes a prospectus of MidAmerican with
respect to MidAmerican common stock that might ultimately be issued in a
business combination between MidAmerican and IES. Information contained herein
is subject to completion or amendment. A registration statement relating to
securities (MidAmerican common stock) has been filed with the Securities and
Exchange Commission (the "SEC"). These securities may not be sold nor may offers
to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
2
<PAGE> 8
THE INFORMATION CONCERNING IES AND THE PROPOSED WISCONSIN TRANSACTION
CONTAINED IN THIS PROXY STATEMENT HAS BEEN TAKEN FROM OR IS BASED UPON DOCUMENTS
AND RECORDS ON FILE WITH THE SEC AND OTHER PUBLICLY AVAILABLE INFORMATION.
MIDAMERICAN HAS NO KNOWLEDGE THAT WOULD INDICATE THAT STATEMENTS RELATING TO IES
CONTAINED IN THIS PROXY STATEMENT IN RELIANCE UPON PUBLICLY AVAILABLE
INFORMATION ARE INACCURATE OR INCOMPLETE. MIDAMERICAN, HOWEVER, HAS NOT BEEN
GIVEN ACCESS TO THE BOOKS AND RECORDS OF IES, WAS NOT INVOLVED IN THE
PREPARATION OF SUCH INFORMATION AND STATEMENTS, AND IS NOT IN A POSITION TO
VERIFY, OR MAKE ANY REPRESENTATION WITH RESPECT TO THE ACCURACY OF, ANY SUCH
INFORMATION OR STATEMENTS.
IMPORTANT
TIME IS OF THE ESSENCE
IF YOU WANT THE OPPORTUNITY TO BENEFIT FROM THE MIDAMERICAN PROPOSED
MERGER, WE URGE YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED BLUE PROXY TO
VOTE AGAINST THE APPROVAL AND ADOPTION OF THE WISCONSIN MERGER AGREEMENT AND THE
PROPOSED WISCONSIN TRANSACTION.
PLEASE ACT TODAY
REJECTION OF THE PROPOSED WISCONSIN TRANSACTION IS A CRITICAL STEP IN
SECURING YOUR OPPORTUNITY TO CONSIDER THE MIDAMERICAN PROPOSED MERGER. DO NOT
SIGN ANY WHITE OR GREEN PROXY SENT TO YOU BY IES.
YOU MAY CHANGE YOUR VOTE
IF YOU HAVE ALREADY RETURNED IES' WHITE OR GREEN PROXY CARD, IT IS NOT TOO
LATE TO CHANGE YOUR VOTE. ONLY YOUR LATEST DATED CARD WILL COUNT. YOU MAY REVOKE
THAT PROXY AND VOTE AGAINST THE APPROVAL AND ADOPTION OF THE WISCONSIN MERGER
AGREEMENT AND THE PROPOSED WISCONSIN TRANSACTION BY SIGNING, DATING AND MAILING
TODAY THE ENCLOSED BLUE PROXY.
3
<PAGE> 9
INTRODUCTION
On August 4, 1996, MidAmerican Energy Company proposed a merger of IES with
and into MidAmerican or a subsidiary of MidAmerican. In the MidAmerican Proposed
Merger, each IES Share would be exchanged, at the option of the IES Shareholder,
for 2.346 shares of MidAmerican common stock (with a market value of $37.83
based on the August 16, 1996 closing price of MidAmerican common stock) in a
tax-free exchange or $39.00 in cash. If more than 40% of the total IES Shares
elect to receive cash then a proration procedure that would be agreed with IES
will be applied and persons electing all cash will receive part cash and part
stock based upon such proration procedure. Any IES Shareholder who elects to
receive all MidAmerican common stock in the MidAmerican Proposed Merger will be
able to do so.
MidAmerican's August 4 merger proposal is the latest in a series of
MidAmerican's efforts to engage IES management in discussions concerning the
benefits of such a combination. In August 1993, IES and Iowa-Illinois Gas and
Electric Company ("Iowa-Illinois"), one of MidAmerican's predecessors, exchanged
confidential information in connection with preliminary discussions regarding a
possible business combination. In connection with such exchange of information,
IES and Iowa-Illinois agreed that, prior to August 1, 1996, neither party nor
its affiliates (which could include MidAmerican) would, without the prior
written consent of the board of directors of the other party: acquire, agree to
acquire or make any proposal to acquire any securities of the other party or any
of its subsidiaries; make, or in any way participate, directly or indirectly, in
any solicitation of proxies to vote, or seek to advise or influence any person
with respect to the voting of, any voting securities of the other party or any
of its subsidiaries; or take certain other actions concerning a merger with IES.
See "Background of the Solicitation -- Prior Communications between MidAmerican
and IES."
In August 1995, the Chairman of the Board and Chairman of the Office of the
Chief Executive Officer of MidAmerican expressed MidAmerican's interest in a
combination with IES in a conversation with IES' Chief Executive Officer.
Thereafter, by letters dated October 3 and October 10, 1995, MidAmerican
attempted to commence a dialogue regarding the benefits of such a combination,
which IES rebuffed. MidAmerican's efforts to discuss a business combination with
IES culminated in an October 23, 1995 written request by MidAmerican for
permission from the Board of Directors of IES (the "IES Board") to propose a
business combination between MidAmerican and IES. IES responded that the IES
Board would consider the matters raised by the October 23 letter at its meeting
in November 1995 and that until then IES would not be interested in
participating with MidAmerican in any discussions relating to a business
combination transaction. See "Background of the Solicitation -- Prior
Communications between MidAmerican and IES." Two weeks later, on November 11,
1995, IES announced that it had entered into the Wisconsin Merger Agreement,
providing for a three-way business combination among IES, Interstate and WPL.
On August 16, 1996, MidAmerican received a letter from IES stating that the
IES Board had rejected the MidAmerican Proposed Merger and that IES, Interstate
and WPL had agreed to revise the Wisconsin Merger Agreement to increase from
1.01 to 1.14 the number of shares of WPL common stock into which each share of
IES common stock would be converted. According to information published by IES,
IES Shareholders will receive an initial annual cash dividend of $2.25 for each
IES Share under the terms of the revised Wisconsin Merger Agreement.
The Proposed Wisconsin Transaction includes terms less favorable to IES and
the IES Shareholders than the MidAmerican Proposed Merger. MidAmerican believes
the MidAmerican Proposed Merger would be financially superior for IES
Shareholders and would better serve the interests of IES' employees, customers
and the Iowa communities it serves than the Proposed Wisconsin Transaction.
IF YOU WANT THE OPPORTUNITY TO BENEFIT FROM THE MIDAMERICAN PROPOSED
MERGER, WE URGE YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED BLUE PROXY CARD
TO VOTE AGAINST THE APPROVAL AND ADOPTION OF THE WISCONSIN MERGER AGREEMENT AND
THE PROPOSED WISCONSIN TRANSACTION.
IES Shareholders could lose the opportunity to take advantage of the
benefits of the MidAmerican Proposed Merger if they approve the Proposed
Wisconsin Transaction. Thus, MidAmerican urges you to vote against the approval
and adoption of the Wisconsin Merger Agreement and the Proposed Wisconsin
Transaction to preserve your opportunity to consider the MidAmerican Proposed
Merger, which MidAmeri-
4
<PAGE> 10
can believes is financially superior to the Proposed Wisconsin Transaction. If
the IES Shareholders do not vote to adopt and approve the Wisconsin Merger
Agreement and the Proposed Wisconsin Transaction, MidAmerican believes the IES
Board will respect the IES Shareholders' vote and take all necessary action in
accordance with their fiduciary duties to achieve the most favorable transaction
for the IES Shareholders. MidAmerican also believes the IES Board will conclude
that the most favorable transaction is a business combination similar to the
MidAmerican Proposed Merger or any other proposal offering more value to IES
Shareholders. There can be no assurance, however, that the IES Board will act to
approve the MidAmerican Proposed Merger.
The consummation of the MidAmerican Proposed Merger and the Proposed
Wisconsin Transaction both would be subject to approval of the Iowa Utilities
Board (the "IUB"), the Illinois Commerce Commission (the "ICC"), the Nuclear
Regulatory Commission (the "NRC"), the Federal Energy Regulatory Commission (the
"FERC"), the expiration or termination of the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and certain other miscellaneous filings. These are the only material
regulatory approvals required to effect the MidAmerican Proposed Merger. By
contrast, in addition to all of the foregoing required regulatory approvals, the
Proposed Wisconsin Transaction would also require approval from the Minnesota
Public Utilities Commission and the Public Service Commission of Wisconsin. IES
and Interstate jointly filed an application for approval of the Proposed
Wisconsin Transaction by the IUB. Their application was subsequently withdrawn
and no approval has been granted by the IUB. If IES and Interstate again file an
application with the IUB, MidAmerican intends to intervene in the IUB
proceedings.
In light of the superior value of the MidAmerican Proposed Merger and the
benefits of the regulatory plan described under the caption "Comparison of the
Proposals -- Regulatory Plan" and with the cooperation of IES, MidAmerican
believes that it will be able to obtain the necessary regulatory approvals for
the Merger within 12 months after execution of a definitive merger agreement
with IES. According to the Joint Proxy Statement/Prospectus of IES, Interstate
and WPL dated July 11, 1996 (the "IES/Interstate/WPL Joint Proxy
Statement/Prospectus"), as of such date IES anticipated the receipt of all
necessary regulatory approvals for the Proposed Wisconsin Transaction during the
first half of 1997.
PRESERVE YOUR OPPORTUNITY TO CONSIDER
THE MIDAMERICAN PROPOSED MERGER BY
VOTING AGAINST THE PROPOSED WISCONSIN TRANSACTION
The MidAmerican Proposed Merger cannot be proposed to IES Shareholders if
the IES Shareholders approve the Proposed Wisconsin Transaction. MidAmerican
urges you to vote against the Proposed Wisconsin Transaction and preserve your
opportunity to consider the MidAmerican Proposed Merger.
MidAmerican believes that the MidAmerican Proposed Merger is financially
superior for the IES Shareholders to either IES remaining independent or IES
completing the Proposed Wisconsin Transaction. Advantages of the MidAmerican
Proposed Merger include, among others:
- -- GREATER VALUE. Based on closing stock prices for Friday, August 16, 1996,
the MidAmerican Proposed Merger would provide IES Shareholders with a 13%
premium above IES' market price, as compared to only a 7% premium in the
Proposed Wisconsin Transaction. The MidAmerican Proposed Merger, therefore,
would offer a 6% premium ($2.25 per IES Share) above the implied value of
the Proposed Wisconsin Transaction.
- -- HIGHER DIVIDEND. The MidAmerican Proposed Merger would allow IES
Shareholders to receive a pro forma annual dividend of $2.82 per IES Share,
a 34% increase above IES' current annual dividend rate, based on the ratio
of 2.346 shares of MidAmerican common stock per IES Share and MidAmerican's
current annual dividend of $1.20 per share. This compares to the
anticipated pro forma annual dividend of $2.25 in the Proposed Wisconsin
Transaction. The MidAmerican Proposed Merger, therefore, would offer a
dividend which is $0.57 per share, or 25% higher, than in the Proposed
Wisconsin Transaction.IES Shareholders will only receive this dividend on
any shares they elect to exchange for MidAmerican common stock. IES
Shareholders may elect to exchange all of their shares for MidAmerican
common stock. If they choose not to exchange all of their IES Shares for
shares of MidAmerican common stock
5
<PAGE> 11
and instead elect to receive cash, they will not receive future dividends
on shares exchanged for cash but will have the after-tax cash proceeds from
the sale of their IES Shares available for reinvestment. See "Comparison of
the Proposals -- MidAmerican Proposed Merger Premium and Dividend Impact"
and "-- Potential Cost Savings."
- -- CHOICE OF CASH OR STOCK. The MidAmerican Proposed Merger would allow IES
Shareholders a choice of cash or, on a tax-free basis, stock in an
Iowa-based company that MidAmerican believes will be a stronger and more
competitive total energy provider for Iowa, with an aggressive regional
growth strategy. In the MidAmerican Proposed Merger, each IES Share would
be exchanged, at the option of the IES Shareholder, for 2.346 shares of
MidAmerican common stock (with a market value of $37.83 based on the August
16, 1996 closing price of MidAmerican common stock) in a tax-free exchange
or $39.00 in cash. If more than 40% of the total IES Shares elect to
receive cash then a proration procedure will be applied (and persons
electing all cash will receive part cash and part stock based upon a
proration procedure that would be agreed with IES). Holders of IES Shares
who elect to receive all MidAmerican common stock in the MidAmerican
Proposed Merger will be able to do so.
- -- MORE THAN $650 MILLION IN COST SAVINGS. Based exclusively on public
information relating to IES, MidAmerican has identified aggregate cost
savings of more than $650 million during the first ten years following
completion of the MidAmerican Proposed Merger. As cost savings estimates
are based upon certain assumptions about the future, there can be no
assurance that the cost savings estimated for either the MidAmerican
Proposed Merger or the Proposed Wisconsin Transaction will be realized in
such amounts and actual cost savings may be more or less than those
estimated.
- -- MIDAMERICAN'S MERGER COMPLETION TRACK RECORD. The MidAmerican Proposed
Merger offers IES Shareholders an opportunity to take advantage of
MidAmerican management's proven track record of successfully completing
mergers, including expeditiously obtaining regulatory approvals, so that
shareholders and customers may promptly realize merger related benefits.
A VOTE AGAINST THE APPROVAL AND ADOPTION OF THE WISCONSIN MERGER AGREEMENT
AND THE PROPOSED WISCONSIN TRANSACTION SENDS A STRONG MESSAGE TO THE IES BOARD
THAT YOU WANT TO PRESERVE YOUR OPPORTUNITY TO CONSIDER THE MIDAMERICAN PROPOSED
MERGER, WHICH MIDAMERICAN BELIEVES IS FINANCIALLY SUPERIOR TO THE PROPOSED
WISCONSIN TRANSACTION.
A VOTE AGAINST THE APPROVAL AND ADOPTION OF THE WISCONSIN MERGER AGREEMENT
AND THE PROPOSED WISCONSIN TRANSACTION WILL PRESERVE YOUR OPPORTUNITY TO
CONSIDER THE MIDAMERICAN PROPOSED MERGER AND WILL MOVE ALL IES SHAREHOLDERS
CLOSER TO BEING ABLE TO BENEFIT FROM THE MIDAMERICAN PROPOSED MERGER.
YOU CAN TAKE THESE IMMEDIATE STEPS TO HELP OBTAIN THE MAXIMUM VALUE FOR
YOUR SHARES:
(1) Sign, date and mail your BLUE proxy card voting AGAINST the
approval and adoption of the Wisconsin Merger Agreement and the
Proposed Wisconsin Transaction.
(2) Do not sign any white or green proxy card sent to you by IES.
If you have already returned a white or green proxy card, you may
revoke your earlier vote simply by signing, dating and mailing the
enclosed BLUE proxy card. Remember, only your latest dated card will
count.
(3) Make your views known to the IES Board.
THE INFORMATION CONCERNING IES AND THE PROPOSED WISCONSIN TRANSACTION
CONTAINED IN THIS PROXY STATEMENT HAS BEEN TAKEN FROM OR IS BASED UPON DOCUMENTS
AND RECORDS ON FILE WITH THE SEC AND OTHER PUBLICLY AVAILABLE INFORMATION.
MIDAMERICAN HAS NO KNOWLEDGE THAT WOULD INDICATE THAT STATEMENTS RELATING TO IES
CONTAINED IN THIS PROXY STATEMENT IN RELIANCE UPON PUBLICLY AVAILABLE
INFORMATION ARE INACCURATE OR INCOMPLETE. MIDAMERICAN, HOWEVER, HAS NOT BEEN
GIVEN ACCESS TO THE BOOKS AND RECORDS OF IES, WAS NOT INVOLVED IN THE
PREPARATION OF SUCH INFORMATION AND STATEMENTS, AND IS NOT IN A POSITION TO
VERIFY, OR MAKE ANY REPRESENTATION WITH RESPECT TO THE ACCURACY OF, ANY SUCH
INFORMATION OR STATEMENTS.
6
<PAGE> 12
BACKGROUND OF THE SOLICITATION
PRIOR COMMUNICATIONS BETWEEN MIDAMERICAN AND IES
IES and MidAmerican and one of MidAmerican's predecessors have discussed
the possibility of a merger at various times over the last three years. In
August 1993, IES and Iowa-Illinois exchanged confidential information in
connection with preliminary discussions regarding a possible business
combination. In connection with those discussions, IES and Iowa-Illinois
executed a Confidentiality and Standstill Agreement. In addition to customary
terms concerning the confidentiality and use of materials provided by each party
to the other, IES and Iowa-Illinois agreed that, prior to August 1, 1996,
neither party nor its affiliates (which could include MidAmerican) would,
without the prior written consent of the board of directors of the other party
(i) in any manner acquire, agree to acquire or make any proposal to acquire,
directly or indirectly, any securities of the other party or any of its
subsidiaries, (ii) in any manner acquire, agree to acquire or make any proposal
to acquire, directly or indirectly, any property of the other party or any of
its subsidiaries, except in the ordinary course of business, (iii) make, or in
any way participate, directly or indirectly, in any solicitation of proxies to
vote, or seek to advise or influence any person with respect to the voting of,
any voting securities of the other party or any of its subsidiaries, (iv) form,
join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) with respect to any voting securities of the other party or any of its
subsidiaries, (v) otherwise act, alone or in concert with others, to seek to
control or influence the management, board of directors or policies of the other
party, (vi) disclose any intention, plan or arrangement inconsistent with the
foregoing, or (vii) advise, assist or encourage any other persons in connection
with any of the foregoing. Each party also agreed, for such period, not to (i)
request the other party or its representatives, directly or indirectly, to amend
or waive any such obligation or (ii) take any action which might require the
other party to make a public announcement regarding the possibility of a
business combination or merger.
In August 1995, following the merger of Iowa-Illinois and Midwest Resources
Inc. ("Midwest Resources"), Russell E. Christiansen, Chairman of the Board and
Chairman of the Office of the Chief Executive Officer of MidAmerican, expressed
MidAmerican's interest in a combination with IES in a conversation with Lee Liu,
Chairman, President and Chief Executive Officer of IES. On October 3, 1995, Mr.
Christiansen and Stanley J. Bright, President and President of the Office of the
Chief Executive Officer of MidAmerican, wrote to Mr. Liu, expressing their
interest in such a combination, explaining the synergies of such a combination
and describing the opportunity to create a strong Iowa-based utility which would
continue to have a major impact on the economy of Iowa. On October 6, 1995, Mr.
Liu wrote to Messrs. Christiansen and Bright that IES was not interested in
entering into discussions with MidAmerican relative to a possible combination
transaction.
On October 10, 1995, Messrs. Christiansen and Bright wrote to Mr. Liu that
they would continue to review and analyze the benefits of the proposed
combination. On October 23, 1995, Messrs. Christiansen and Bright wrote to Mr.
Liu requesting that the IES Board grant MidAmerican permission to make an offer
whereby: MidAmerican and IES would participate in a "merger of equals"
transaction in which IES Shareholders would receive a premium of 15% over the
IES share price of $26.875 at October 20, 1995; the combined MidAmerican/IES
would continue to maintain a significant and appropriate presence in Cedar
Rapids, Iowa; IES Shareholders would have appropriate representation on the
board of directors of the combined MidAmerican/IES; and the combined
MidAmerican/IES would be organized as a holding company exempt from regulation
under the Public Utility Holding Company Act of 1935, as amended. The October 23
letter urged Mr. Liu to meet with Messrs. Christiansen and Bright to discuss
their request.
On October 26, 1995, Mr. Liu wrote to Messrs. Christiansen and Bright that
the IES Board would consider the matters raised by the October 23 letter at its
regular meeting in November 1995 and that until then IES would not be interested
in participating with MidAmerican in any discussions relating to a business
combination transaction.
MidAmerican received no further communication from IES. On November 11,
1995, IES announced that it had entered into the Wisconsin Merger Agreement.
7
<PAGE> 13
THE AUGUST 4 OFFER AND SUBSEQUENT DEVELOPMENTS
On August 4, 1996, MidAmerican delivered to Mr. Liu a letter setting forth
MidAmerican's proposal that IES and MidAmerican effect the MidAmerican Proposed
Merger, which, among other things, would provide a premium of 31% over the IES
Share price of August 2, 1996 (the last trading day prior to such letter). The
letter also pointed out that a combination with MidAmerican would produce over
$500 million in savings during the ten years following consummation of the
MidAmerican Proposed Merger.
Shortly after delivery of the letter, MidAmerican made a public
announcement regarding the delivery of the August 4 letter and released the
letter to the Dow Jones News Service and other media outlets.
On August 16, 1996, MidAmerican received a letter from IES stating that the
Board of Directors of IES had rejected the MidAmerican Proposed Merger and that
IES, Interstate and WPL had agreed to revise the Wisconsin Merger Agreement to
increase from 1.01 to 1.14 the number of shares of WPL common stock into which
each share of IES Common Stock would be converted. It is anticipated that IES
Shareholders will receive an initial annual cash dividend of $2.25 for each IES
Share under the terms of the revised Wisconsin Merger Agreement.
On August 19, 1996, MidAmerican commenced the solicitation of proxies
against the Proposed Wisconsin Transaction.
THE WISCONSIN MERGER AGREEMENT
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus,
subject to the alternative structure described below, the Wisconsin Merger
Agreement provides for: (i) the merger of IES with and into WPL (the "IES
Merger"), pursuant to which each IES Share (other than shares held by IES
Shareholders who perfect dissenters' rights under applicable state law, and
other than IES Shares owned by WPL, IES or Interstate or any of their respective
subsidiaries, which shares will be cancelled) will be converted into the right
to receive 1.01 shares of common stock of WPL, which will be renamed Interstate
Energy Corporation ("Interstate Energy"); and (ii) the merger of Acquisition
with and into Interstate, which merger will result in Interstate becoming a
subsidiary of Interstate Energy, pursuant to which (a) each outstanding share of
common stock of Interstate (other than shares owned by WPL, IES or Interstate or
any of their respective subsidiaries, which shares will be cancelled) will be
converted into the right to receive 1.11 shares of Interstate Energy common
stock and (b) each outstanding share of preferred stock of Interstate (other
than shares held by Interstate preferred stockholders who perfect dissenters'
rights under applicable state law) will remain outstanding. According to the
IES/Interstate/WPL Joint Proxy Statement/Prospectus, unless regulatory
requirements require the foregoing transactions to be consummated pursuant to
the alternative structure described below, the Wisconsin Merger Agreement
provides that such transactions will be effected in the manner described above.
According to IES' August 16, 1996 letter to MidAmerican, IES, Interstate
and WPL have agreed to increase the conversion ratio of the IES Shares from 1.01
shares to 1.14 shares of Interstate Energy common stock for each IES Share.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, the
Wisconsin Merger Agreement provides that if, prior to the consummation of the
transactions described above, the constituent companies determine that certain
regulatory requirements mandate that the utility subsidiaries of Interstate
Energy be Wisconsin corporations, (i) the IES Merger will be effected as
described above and (ii) IES Utilities Inc., an Iowa corporation ("Utilities"),
will be merged (the "Utilities Reincorporation Merger") with and into IES
Utilities Inc., a Wisconsin corporation ("New Utilities"), pursuant to which
each outstanding share of common stock of Utilities will be converted into one
share of common stock of New Utilities. According to the IES/Interstate/WPL
Joint Proxy Statement/Prospectus, if the Utilities Reincorporation Merger is to
be consummated, it is currently anticipated that the shares of cumulative
preferred stock of Utilities then outstanding will be redeemed by Utilities
prior to the consummation of such merger. According to the IES/Interstate/WPL
Joint Proxy Statement/Prospectus, redemption of the Utilities preferred stock is
not expected to occur as part of the transactions contemplated by the Wisconsin
Merger Agreement if the Utilities Reincorporation Merger is not required to be
effected. According to the IES/ Interstate/WPL Joint Proxy Statement/Prospectus,
if the Utilities Reincorporation Merger is not effected,
8
<PAGE> 14
the Utilities preferred stock will remain outstanding and unchanged as a result
of the Proposed Wisconsin Transaction. In addition, the merger involving
Interstate will be reconstituted to provide for (i) the merger of Interstate
with and into New Interstate, pursuant to which (a) each outstanding share of
Interstate common stock (other than shares owned by WPL, IES or Interstate or
any of their respective subsidiaries, which shares will be cancelled) will be
converted into one share of common stock of New Interstate and (b) each
outstanding share of Interstate preferred stock (other than dissenting shares)
will be converted into one share of preferred stock of New Interstate with terms
and designations under New Interstate's Restated Articles of Incorporation
substantially identical to those of Interstate's preferred stock under
Interstate's Restated Certificate of Incorporation, including certain additional
voting rights proposed to be approved at Interstate's annual meeting of
shareholders; and (ii) the merger of Acquisition with and into New Interstate,
which merger will result in New Interstate becoming a subsidiary of Interstate
Energy, pursuant to which (a) each outstanding share of New Interstate common
stock (other than shares owned by WPL, IES or Interstate or any of their
respective subsidiaries, which will be cancelled) will be converted into the
right to receive shares of Interstate Energy common stock and (b) each
outstanding share of New Interstate preferred stock (other than dissenting
shares) will remain outstanding.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, the
Proposed Wisconsin Transaction is subject to certain conditions including, among
others, a condition that all regulatory and shareholder approvals be obtained.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, the
Wisconsin Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after approval by the shareowners of WPL, IES and
Interstate: (a) by mutual written consent of WPL, IES and Interstate, (b) by any
party thereto, by written notice to the other parties, if the effective time of
the Proposed Wisconsin Transaction (the "Effective Time") shall not have
occurred on or before May 10, 1997 (which date shall be extended to May 10, 1998
if the required statutory approvals and consents have not been obtained by May
10, 1997, but all other conditions to closing of the Proposed Wisconsin
Transaction shall be, or shall be capable of being fulfilled); provided,
however, that such right to terminate the Wisconsin Merger Agreement will not be
available to any party whose failure to fulfill any obligation under the
Wisconsin Merger Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before that date; (c) by any party thereto if
any required shareholder approval was not obtained at a duly held meeting of
shareholders or at any adjournment thereof; (d) by any party thereto, if any
state or federal law, order, rule or regulation is adopted or issued, which has
the effect of prohibiting the Proposed Wisconsin Transaction, or any court of
competent jurisdiction in the U.S. or any state shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
the Mergers, and such order, judgment or decree shall have become final and
nonappealable; (e) by WPL, IES or Interstate upon two days' prior notice to the
other parties, if, as a result of a tender offer by a person other than the
other parties, or any of their affiliates, or any written offer or proposal with
respect to a merger of such party, sale of a material portion of such party's
assets or other business combination involving such party (each, a "Business
Combination") by a person other than the other parties, or any of their
affiliates, the Board of Directors of such party determines in good faith that
its fiduciary obligations under applicable law require that such tender offer or
other written offer or proposal be accepted; provided, however, that (i) the
Board of Directors of such party has been advised in writing by outside counsel
that notwithstanding a binding commitment to consummate an agreement of the
nature of the Wisconsin Merger Agreement entered into in the proper exercise of
their applicable fiduciary duties and notwithstanding all concessions which may
be offered by the other parties, such fiduciary duties would also require the
directors to reconsider such commitment as a result of such tender offer or
other written offer or proposal; and (ii) prior to any such termination, such
party shall, and shall cause its respective financial and legal advisors to,
negotiate with the other parties to make such adjustments in the terms and
conditions of the Wisconsin Merger Agreement as would enable such party to
proceed with the transactions contemplated thereby on such adjusted terms, or
(f) by either WPL, IES or Interstate, by written notice to the other parties, if
(i) there exist breaches of the representations and warranties on the part of
either of the other parties made in the Wisconsin Merger Agreement or the Stock
Option Agreements (as defined below) as of the date thereof which breaches,
individually or in the aggregate, would or would be reasonably likely to result
in a material adverse effect on the business, assets, financial condition,
results of operations or prospects of such other party and its
9
<PAGE> 15
subsidiaries taken as a whole, and such breaches shall not have been remedied
within 20 days after receipt by the breaching party of notice in writing from
the non-breaching party or parties, specifying the nature of such breaches and
requesting that they be remedied; (ii) either of the other parties (and/or their
appropriate subsidiaries) has not performed and complied in all respects with
certain agreements and covenants relating to the absence of changes in
capitalization or issuance of securities or has failed to perform and comply, in
all material respects, with its other agreements and covenants under the
Wisconsin Merger Agreement or under the Stock Option Agreements, and such
failure to perform or comply has not been remedied within 20 days after receipt
by the breaching party of notice in writing from the non-breaching party,
specifying the nature of such failure and requesting that it be remedied, or
(iii) the Board of Directors of either of the other parties or any committee
thereof (A) shall withdraw or modify in any manner adverse to such party its
approval or recommendation of the Wisconsin Merger Agreement or the Proposed
Wisconsin Transaction, (B) shall fail to reaffirm such approval or
recommendation upon such party's request, (C) shall approve or recommend any
acquisition of either of the other parties or a material portion of their assets
or any tender offer for either of the other parties' common stock, in each case
by a party other than such party or any of its affiliates or (D) shall resolve
to take any of the actions specified in clauses (A), (B), or (C).
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, if
the Wisconsin Merger Agreement is terminated at such time as it is terminable by
WPL, IES or Interstate (but not all three) for breaches of any representations
or warranties contained in the Wisconsin Merger Agreement as of the date
thereof, or of agreements and covenants contained in the Wisconsin Merger
Agreement or the Stock Option Agreements, pursuant to the provisions of the
Wisconsin Merger Agreement described in clauses (f)(i) and (f)(ii) in the
previous paragraph, then if such breach is not willful, each non-breaching party
is entitled to reimbursement of its documented out-of-pocket expenses, not to
exceed $5,000,000 per each non-breaching party. In the event of a willful
breach, the non-breaching party or parties will be entitled to its or their
out-of-pocket expenses and fees (which shall not be limited to $5,000,000) and
any remedies it or they may have at law or in equity, and provided that if, at
the time of the breaching party's or parties' willful breach, there shall have
been a third-party tender offer or proposal for a Business Combination which has
not been rejected by the breaching party or parties or withdrawn by the third
party, and within two and one-half years of any termination by the non-breaching
party or parties, the breaching party or parties become a subsidiary of such
offeror or of an affiliate of such offeror or accept an offer to consummate or
consummates a Business Combination with such third party, then such breaching
party or parties, upon the closing of such Business Combination, will pay to the
non-breaching party or parties an additional aggregate fee equal to $25,000,000,
if WPL or IES is the breaching party, or $12,500,000, if Interstate is the
breaching party.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, the
Wisconsin Merger Agreement also requires payment of an aggregate termination fee
of $25,000,000, if WPL or IES is the Target Party (as hereinafter defined), or
$12,500,000, if Interstate is the Target Party, together with reimbursement of
out-of-pocket expenses, by one party (the "Target Party") to the other parties
in the following circumstances: (1) the Wisconsin Merger Agreement is terminated
(x) as a result of the acceptance by the Target Party of a third-party tender
offer or proposal for a Business Combination, (y) following a failure of the
shareholders of the Target Party to grant their approval to the Proposed
Wisconsin Transaction or (z) as a result of the Target Party's material failure
to convene a shareholders meeting, distribute proxy materials and, subject to
its Board of Directors' fiduciary duties, recommend the Proposed Wisconsin
Transaction to its shareholders; (2) at the time of such termination or prior to
the meeting of such party's shareholders there has been a third-party tender
offer or proposal for a Business Combination which shall not have been rejected
by the Target Party or withdrawn by such third party; and (3) within two and
one-half years of any such termination described in clause (1) above, the Target
Party accepts an offer to consummate or consummates a Business Combination with
such third party. The applicable termination fee and out-of-pocket expenses
referred to in the previous sentence will be paid at the closing of such
third-party Business Combination.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, if
the Wisconsin Merger Agreement is terminated under circumstances that give rise
to the payment of the termination fee discussed above by the Target Party
referred to above and within nine months of such termination one of the non-
terminating parties is acquired by the same third-party offeror, the sole
remaining party will be entitled to (i) a second termination fee of $25,000,000,
if WPL or IES is the second target party, or $12,500,000 if Interstate is
10
<PAGE> 16
the second target party, on the signing of a definitive agreement, or if no such
agreement is signed at the closing, relating to such Business Combination, and
(ii) payment of any termination fee paid to such second target party by the
original terminating party (i.e., the first Target Party) pursuant to the
termination of the Wisconsin Merger Agreement. If only one party must pay
expenses, or is entitled to receive a termination fee as set forth above, such
party will pay or receive one hundred percent (100%) of the applicable expenses
or fee. If two parties are required to pay expenses or entitled to receive any
such fee, each such party's percentage of such expenses or fee will equal a
fraction, the numerator of which shall be, in the case of IES or Interstate the
number of shares of Interstate Energy common stock which would have been
issuable (on a fully diluted basis) to such party's shareholders, or, in the
case of WPL, the number of shares of Interstate Energy common stock (on a fully
diluted basis) that would have been retained by its shareholders, had the
Effective Time occurred at the time the Wisconsin Merger Agreement is
terminated, and the denominator of which will be the aggregate number of shares
of Interstate Energy common stock that would have been issuable to or retained
by (in either case on a fully diluted basis) the shareholders of the two parties
required to pay expenses or entitled to receive such fee had the Effective Time
occurred at the time the Wisconsin Merger Agreement is terminated.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, in
connection with the execution and delivery of the Wisconsin Merger Agreement,
IES, Interstate and WPL entered into reciprocal option grantor/option holder
stock option and trigger payment agreements (the "Stock Option Agreements") each
granting the other two parties an irrevocable option (each, an "Option") to
purchase, under certain circumstances, a certain percentage of authorized but
unissued shares of the respective issuer's common stock (representing up to an
aggregate of 19.9% of the outstanding common stock (the "Option Shares") of such
issuer on November 10, 1995), at an exercise price of $30.675 per share in the
case of WPL common stock, $26.7125 per share in the case of IES Shares and
$28.9375 per share in the case of Interstate common stock.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, in
the event that the Wisconsin Merger Agreement becomes terminable under
circumstances in which a termination fee could be payable by one or more parties
(any such party, a "Payor") pursuant to the second preceding paragraph, the
Stock Option Agreements will entitle the other party or parties to require the
Payor or Payors to repurchase such Option or the Option Shares issued upon
exercise thereof or to make a payment.
The termination fees payable by WPL, IES and/or Interstate under the
foregoing provisions plus the aggregate amount which could be payable by WPL,
IES and/or Interstate under the Stock Option Agreements may not exceed
$40,000,000 (for WPL or IES) or $20,000,000 (for Interstate) in the aggregate.
COMPARISON OF THE PROPOSALS
MIDAMERICAN PROPOSED MERGER PREMIUM AND DIVIDEND IMPACT
MidAmerican believes that the MidAmerican Proposed Merger is financially
superior to the Proposed Wisconsin Transaction. The MidAmerican Proposed Merger
would provide a premium to IES Shareholders, as shown by the following table:
<TABLE>
<CAPTION>
MIDAMERICAN
PROPOSED IES
MERGER SHARE PERCENT
PRICE* PRICE DIFFERENTIAL*
----------- ------- -------------
<S> <C> <C> <C>
August 2, 1996 (last trading day before public
announcement of the August 4 offer).................... $ 39.00 $ 29.75 31%
August 16, 1996 (last trading day prior to the date of
this Proxy Statement).................................. $ 38.30 $33.875 13%
</TABLE>
- ---------------
* Based on the closing price of MidAmerican Common Stock and the IES Shares on
the indicated dates. The MidAmerican Proposed Merger Price is calculated based
upon an IES Shareholder receiving 40% cash ($15.60 per share) and the
remainder in MidAmerican common stock (1.4076 shares of MidAmerican common
stock with an aggregate market value of $23.40 per share (as of August 2,
1996) and $22.70 per share (as of August 16, 1996), respectively). Individual
IES Shareholders may receive all shares, or, subject to proration, all cash.
11
<PAGE> 17
The MidAmerican Proposed Merger would also provide a premium to IES
Shareholders in relation to the Proposed Wisconsin Transaction, as shown by the
following table:
<TABLE>
<CAPTION>
MIDAMERICAN PROPOSED
PROPOSED WISCONSIN
MERGER TRANSACTION PERCENT
PRICE PRICE DIFFERENTIAL*
----------- ----------- -------------
<S> <C> <C> <C>
August 16, 1996 (last trading day prior to the date of
this Proxy Statement)................................. $ 38.30 $ 36.05 6%
</TABLE>
- ---------------
* Based on the closing price of MidAmerican common stock, the IES Shares and the
common stock of WPL on the indicated date.
In addition, the MidAmerican Proposed Merger would provide an immediate
dividend increase to IES Shareholders as shown by the following table:
<TABLE>
<CAPTION>
CURRENT NEW
IES IES PERCENT
DIVIDEND DIVIDEND DIFFERENTIAL DIFFERENTIAL
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
MidAmerican Proposed Merger....................... $ 2.10 $ 2.82* $ 0.72 34%
Proposed Wisconsin Transaction.................... $ 2.10 $ 2.25** $ 0.15 7%
</TABLE>
- ---------------
* Based on the ratio of 2.346 shares of MidAmerican common stock per IES Share
and MidAmerican's current annual dividend rate of $1.20 per share. Although
the declaration of future dividends will depend upon future earnings, the
financial condition of MidAmerican and other factors, MidAmerican does not
anticipate any significant change with respect to its historical dividend
practice as a result of the MidAmerican Proposed Merger.
** According to information published by IES.
The premium to IES Shareholders receiving MidAmerican common stock will
change as the market prices of MidAmerican common stock and the IES Shares
change. The dividend increase to IES Shareholders will not change as the market
prices of MidAmerican common stock or the IES Shares change. IES Shareholders
will receive this dividend only with respect to IES Shares they elect to
exchange for MidAmerican common stock. IES Shareholders may elect to exchange
all of their IES Shares for MidAmerican common stock, and if they choose not to
do so they will not receive future dividends on IES Shares exchanged for cash
but will have the after-tax cash proceeds from the sale of their IES Shares
available for reinvestment. For example, a holder of 100 IES Shares who elects
cash with respect to 50 IES Shares and stock with respect to 50 IES Shares will
receive, subject to any proration if holders of more than 40% of the IES Shares
elect cash, $1,950 in cash plus 117 shares of MidAmerican common stock with an
annual dividend, based on the dividend assumptions set forth above, of $1.20 per
share of MidAmerican common stock, or $140.76 per year. Such a holder's annual
dividend income would decline (because he or she exchanged half of his or her
IES Shares for cash), but he or she could reinvest the after-tax cash proceeds
from the exchange of the 50 IES Shares, which would have to be reinvested
(assuming no tax on the sale of IES Shares) at approximately 7.2% for such
proceeds to yield the same dividend or interest income as the shares of
MidAmerican common stock such holder elected not to receive.
POTENTIAL COST SAVINGS
The analyses discussed below include forward looking statements that
involve judgments, assumptions and other uncertainties beyond the control of
MidAmerican. As such, there can be no assurance that the cost savings will be
realized in the amounts referred to herein and actual cost savings may be more
or less than those estimated. Such judgments, assumptions and uncertainties are
discussed more fully below. MidAmerican is unable to predict how regulators may
choose to allocate (through ratemaking authority) these cost savings between
shareholders and customers, but MidAmerican does not believe any reasonably
foreseeable allocation of such cost savings or shortfall in such anticipated
cost savings will adversely affect MidAmerican's ability to maintain at least
its current dividend level.
12
<PAGE> 18
MidAmerican believes that the IES Shareholders, as well as IES' customers,
employees and the communities it serves, would realize substantial benefits from
the MidAmerican Proposed Merger. MidAmerican believes such benefits would be
realized through the following operational and structural synergies:
- Operational coordination -- The overlapping and contiguous nature of the
respective service territories of MidAmerican and IES, which both operate
in Iowa and whose headquarters are within 125 miles of one another,
provide an opportunity to efficiently integrate significant aspects of
their utility operations. MidAmerican already has numerous substantial
electrical interconnections with IES and provides gas service in
locations in which IES provides electric service. The combined system
would be expected to benefit because it could be operated as part of a
larger, cohesive system, with virtually no modification needed with
respect to existing generating and transmission facilities, in contrast
to the Proposed Wisconsin Transaction which contemplates the construction
of transmission facilities to achieve full integration of its electrical
systems. At present, MidAmerican and IES maintain joint interests in
approximately 1,229 megawatts of generation capacity that accounts for
more than $540 million in assets.
- Increased size and stability and more integrated product and service
portfolio -- As a larger entity, a combined MidAmerican/IES will have
more diverse generating, transmission and customer bases and enhanced
access to capital markets. As a consequence, a combined MidAmerican/IES
will be better able to take advantage of future strategic opportunities
that arise as the demands of a competitive market intensify. Further, a
combined MidAmerican/IES will have reduced exposure to changes in
economic conditions in any given segment of the business. Finally, the
integration of the gas and electric business segments would enable the
combined MidAmerican/IES to enhance the portfolio of products and
services available to customers, positioning MidAmerican/IES as a premier
provider of comprehensive energy solutions.
- Economic development opportunities -- The combined MidAmerican/IES would
be able to concentrate its economic development programs and activities
rather than pursuing parallel paths, enhancing the ability to attract or
to retain Iowa customers or industry groups.
MidAmerican believes that available synergies will generate cost savings in
excess of $650 million to the combined MidAmerican/IES over a ten-year period.
Such cost savings are projected to begin in 1998 and generally increase each
year thereafter. Such estimates are based on a review of publicly available
information performed by MidAmerican. MidAmerican's estimate of merger synergies
is based upon both an initial preliminary estimate of synergies developed by
senior management using public information and subsequent and continuing
analyses conducted with the assistance of MidAmerican managers responsible for
specific functional areas. MidAmerican's opinion regarding the savings levels is
based upon its knowledge of its operations, its general understanding of IES'
operations obtained from public information, and its prior experience in
quantifying and obtaining synergies from its prior mergers.
The initial preliminary estimate of $500 million in merger related
synergies was made prior to the public announcement of the MidAmerican Proposed
Merger and was developed by senior management of MidAmerican using only publicly
available information since MidAmerican had not had access to any nonpublic IES
information. Since the announcement of the transaction, an effort has been
underway to refine the initial preliminary estimate through a more detailed
assessment with direct input from the MidAmerican personnel responsible for the
various functional areas of operation. While this process is continuing and the
final result will likely result in some variance from the current estimation,
the present estimate of merger related synergies indicates cost savings of more
than $650 million during the ten years following the MidAmerican Proposed
Merger. This estimate was also developed using only public IES information and
included an analysis of potential payroll cost reductions by functional area, a
review of corporate and administrative program expenditures, an assessment of
purchase economies, a review of system optimization savings, and an estimate of
costs to achieve the merger synergies. A summary of the current synergy
estimate, by year, is set forth below.
THE ANALYSES DISCUSSED BELOW INCLUDE "FORWARD-LOOKING STATEMENTS" WITHIN
THE MEANING OF THE FEDERAL SECURITIES LAWS THAT INVOLVE JUDGMENTS,
13
<PAGE> 19
ASSUMPTIONS AND OTHER UNCERTAINTIES BEYOND THE CONTROL OF MIDAMERICAN. THESE
FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, STATEMENTS CONCERNING REVENUE
AND COST TRENDS, COST RECOVERY, COST REDUCTION STRATEGIES AND ANTICIPATED
OUTCOMES, PRICING STRATEGIES, CHANGES IN THE UTILITY INDUSTRY, PLANNED CAPITAL
EXPENDITURES, FINANCING NEEDS AND AVAILABILITY, STATEMENTS OF MIDAMERICAN'S
EXPECTATIONS, BELIEFS, FUTURE PLANS AND STRATEGIES, ANTICIPATED EVENTS OR TRENDS
AND SIMILAR COMMENTS CONCERNING MATTERS THAT ARE NOT HISTORICAL FACTS.
FORWARD-LOOKING STATEMENTS MADE BY MIDAMERICAN ARE SUBJECT TO RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN, OR IMPLIED BY, THE STATEMENTS. SOME, BUT NOT ALL, OF THE RISKS AND
UNCERTAINTIES INCLUDE GENERAL ECONOMIC CONDITIONS IN THE MIDAMERICAN SERVICE
TERRITORY, COMPETITIVE FACTORS, FEDERAL AND STATE REGULATORY ACTIONS AND
POTENTIAL WEATHER EFFECTS ON SALES AND REVENUES. AS SUCH, THERE CAN BE NO
ASSURANCE THAT THE COST SAVINGS WILL BE REALIZED IN THE AMOUNTS REFERRED TO
HEREIN AND ACTUAL COST SAVINGS MAY BE MORE OR LESS THAN THOSE PROJECTED.
MIDAMERICAN -- IES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 TOTAL
----- ---- ---- ---- ---- ---- ---- ----- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Labor................................... 28.7 30.4 32.0 33.1 34.3 35.5 36.7 38.0 39.4 40.7 349.0
Total Corporate & Administrative
Expenditures................................ 7.4 10.4 11.6 12.9 12.7 12.6 12.5 12.3 12.2 12.1 116.7
Total Purchase Economies...................... 1.4 3.0 8.1 8.4 9.2 9.4 11.3 11.5 11.7 12.0 86.2
Total System Optimization Savings............. 22.9 21.6 22.6 25.6 11.4 26.3 (2.5) (19.8) 20.5 3.9 132.4
Costs to Achieve Synergies.................... (28.8) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (28.8)
Total Synergies............................... 31.6 65.4 74.4 80.0 67.6 83.8 57.9 42.1 83.8 68.7 655.5
</TABLE>
Labor savings of approximately $349 million result from the proposed
reduction of approximately 450 positions of the combined MidAmerican/IES
including corporate, gas operations and electric operations. Corporate and
administrative program expenditures of approximately $117 million include
administrative and general overhead, association dues and memberships, benefits,
insurance, communications, information services, professional services and
shareholder services. Purchase economies of approximately $86 million result
from leveraging the suppliers of materials and supplies, contract services, coal
transportation services and gas transportation services. System optimization
savings of approximately $132 million include fuel savings resulting from the
joint dispatch of the electric generation facilities, alternative power plant
construction, purchase power savings, and savings resulting from the
optimization of gas transportation and storage services. Costs to achieve
synergies of approximately $29 million are intended to include severance costs,
relocation costs, retraining costs and system integration costs.
A comparison of ten year synergy estimates for the Proposed Wisconsin
Transaction (based on publicly available data submitted to the FERC) and the
MidAmerican Proposed Merger (based on MidAmerican's current synergy estimates)
is set forth below.
14
<PAGE> 20
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PROPOSED MIDAMERICAN
WISCONSIN PROPOSED
TRANSACTION MERGER
----------- -----------
<S> <C> <C>
Labor............................................................... $ 381 $ 349
Corporate and Administrative........................................ 149 117
Purchase Economies.................................................. 109 86
System Optimization................................................. 196 132
Costs to Achieve Synergies.......................................... (71) (29)
-----------
$ 764 $ 655
======== ==========
</TABLE>
The costs savings and costs to achieve synergies in the above discussion
and tables is exclusive of transaction costs and break-up fees, if applicable.
If transaction costs of $30 million and break-up fees of $40 million were
included, the total net synergies for the MidAmerican Proposed Merger would be
$585 million.
GENERATION
- Integration of dispatching and electric production operations -- The
combined MidAmerican/IES could obtain fuel savings from the joint
dispatch of generating capacity which are not available when the two
companies are operated as two separate systems. Fuel savings would result
from an improved ability to more efficiently schedule and commit each of
the base, intermediate and peak load facilities of the combined
MidAmerican/IES.
- Avoidance or deferral of future capital expenditures -- The combined
MidAmerican/IES would have the ability to reduce future generating
capacity expenditures by coordinating and optimizing future capital
additions. The combination would also result in enhanced system diversity
due to differences in the mix of generating capacity currently installed,
the electrical loads placed on each system and the timing of peak
demands.
- Integration of generation and technical support functions -- The combined
MidAmerican/IES would be able to eliminate redundant functions in the
areas of generation support, such as system planning and fuels
management.
FIELD OPERATIONS
- Integration of distribution operations -- The combined MidAmerican/IES
would have the ability to optimize the productivity of personnel at
certain customer business offices and service centers in Iowa where
MidAmerican and IES have contiguous or overlapping service territories.
The close proximity of these operations also allows for the consolidation
of customer service functions such as service initiation and service
scheduling. The close proximity of the two companies would enable work to
be reconfigured and resources to be shared in field operations areas.
- Integration of field and technical support functions -- The combined
MidAmerican/IES would be able to eliminate redundant functions in the
areas of transmission and distribution support, such as engineering,
construction, operation and maintenance.
PURCHASING ECONOMIES
- Purchasing economies and streamlining of inventories -- The combined
MidAmerican/IES would achieve savings through the centralization of
purchasing and inventory functions related to construction, operation and
maintenance at generating plants, transmission and distribution
facilities, service centers, warehouses and headquarters. The larger size
of the Company should improve its bargaining position in its purchases of
fuel, gas, materials, services and equipment, resulting in lower unit
costs for such items.
15
<PAGE> 21
CORPORATE AND ADMINISTRATIVE
- Integration of corporate management and administrative functions -- The
combined MidAmerican/IES would be able to eliminate redundant functions
in the areas of finance, accounting, purchasing, shareholder relations,
human resources, corporate planning, public relations and administration,
among other areas. The payroll costs of such functions are relatively
fixed and do not vary directly with an increase or decrease in the number
of customers served.
- Avoidance of future information systems expenditures -- The combined
MidAmerican/IES would be able to eliminate certain duplicate operational
and capital information system expenditures. Examples of these
expenditures include customer information and work management systems
that would not be wholly duplicated in the combined MidAmerican/IES.
Additional expenditures could be reduced through the more efficient
management of investment in other information technology areas, such as
in personal computers, mainframe upgrades and backup facilities.
- Consolidation of corporate programs and expenditures -- The combined
MidAmerican/IES would integrate corporate and administrative functions,
thereby reducing certain non-labor costs, including insurance premiums,
audit and consulting fees, bank service fees, professional and trade
association dues, stock transfer and other fees, vehicle expenses and
various license fees, among others.
PAYROLL COST REDUCTIONS
- Payroll cost reductions -- Based upon MidAmerican's knowledge of IES and
its experience from the previous merger of Midwest Resources and
Iowa-Illinois, in which total payroll costs were significantly reduced,
MidAmerican believes that approximately 50% of the estimated cost savings
would result from payroll cost reductions. MidAmerican believes that
substantial payroll cost reductions can be achieved by employing a
combination of attrition, controlled hiring, retraining, early
retirements, voluntary separation and better management programs, such as
activity standardization and technology substitution. MidAmerican does
not presently intend to use involuntary separations to achieve labor
synergies. As of June 30, 1996, MidAmerican had 3,532 full-time
employees. As of December 31, 1995, according to IES' publicly-filed
documents, IES had approximately 2,635 full-time employees. MidAmerican's
savings estimates for the MidAmerican Proposed Merger contemplate a
reduction of approximately 450 positions.
While data concerning the estimated cost savings from the Proposed
Wisconsin Transaction set forth in the IES/Interstate/WPL Joint Proxy
Statement/Prospectus reflect the benefits of complete access to personnel and
detailed data within those companies and the identification of specific cost
savings categories, MidAmerican has not had similar access. The
IES/Interstate/WPL Joint Proxy Statement/Prospectus states the belief of IES,
WPL and Interstate that the Proposed Wisconsin Transaction could result in
potential net cost savings (that is, after taking into account the costs
incurred to achieve such savings) of approximately $749 million during the
ten-year period following completion of the Proposed Wisconsin Transaction and
MidAmerican believes that upon inspection of similar data and discussions with
IES personnel, cost savings opportunities in addition to the more than $650
million currently estimated by MidAmerican can be identified.
BECAUSE MIDAMERICAN WAS UNABLE TO DISCUSS THE ABOVE ANALYSES WITH IES AND
DID NOT HAVE ACCESS TO NON-PUBLIC MATERIAL CONCERNING IES' OPERATIONS, THE
FOREGOING ANALYSES WERE NECESSARILY LIMITED IN SCOPE TO MATTERS FOR WHICH
INFORMATION WAS PUBLICLY AVAILABLE. IN ADDITION, SUCH ANALYSES INVOLVE JUDGMENTS
AND CONTAIN FORWARD-LOOKING STATEMENTS WITH RESPECT TO, AMONG OTHER THINGS,
NORMAL WEATHER CONDITIONS, FUTURE NATIONAL AND REGIONAL ECONOMIC AND COMPETITIVE
CONDITIONS, INFLATION RATES, REGULATORY TREATMENT, FUTURE FINANCIAL MARKET
CONDITIONS, INTEREST RATES, FUTURE BUSINESS DECISIONS AND OTHER UNCERTAINTIES,
WHICH, THOUGH CONSIDERED REASONABLE BY MIDAMERICAN, ARE BEYOND MIDAMERICAN'S
CONTROL AND DIFFICULT TO PREDICT. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT
SUCH COST SAVINGS WILL BE REALIZED, AND ACTUAL COST SAVINGS MAY VARY MATERIALLY
16
<PAGE> 22
FROM THOSE SET FORTH ABOVE. IN LIGHT OF THE UNCERTAINTIES INHERENT IN SUCH
ANALYSES, THE INCLUSION OF ESTIMATED COST SAVINGS HEREIN SHOULD NOT BE REGARDED
AS A REPRESENTATION BY MIDAMERICAN OR ANY OTHER PERSON THAT SUCH COST SAVINGS
WILL BE ACHIEVED.
Summary of Savings Assumptions
The following is a summary of selected significant assumptions made with
respect to the potential synergies of the MidAmerican Proposed Merger: (i) the
savings period is 1998 through 2007; (ii) initial savings will be lower in 1998
due to expenditures of costs to achieve merger savings; (iii) the combined
MidAmerican/IES will be organized as an operating utility with consolidated
administrative and support functions; (iv) synergies reflect merger-related
opportunities only; (v) savings are exclusive of planned MidAmerican actions on
a stand-alone basis; (vi) multiple programs will be utilized for payroll
reductions; and (vii) payroll reduction programs are consistent with recent
experience.
REGULATORY PLAN
The allocation of the benefits and cost savings outlined above among the
shareholders of MidAmerican and IES and their respective customers will depend
on the extent by which the rates of MidAmerican and IES are adjusted to reflect
such benefits. Although no assurances can be given, MidAmerican anticipates that
such adjustments will occur through approval of a regulatory plan (the
"Regulatory Plan") that MidAmerican intends to propose in its application to the
IUB and the ICC seeking approval of the MidAmerican Proposed Merger. MidAmerican
is unable to predict how regulators may choose to allocate (through rate making
authority) these cost savings between shareholders and customers, but
MidAmerican does not believe any reasonably foreseeable allocation of such cost
savings will adversely affect MidAmerican's ability to maintain at least its
present dividend level.
The Regulatory Plan is expected to reflect MidAmerican's current electric
pricing targets for average class prices by June 1, 2001. There can be no
assurance that the Regulatory Plan will be implemented. In addition, MidAmerican
reserves the right to propose changes to the Regulatory Plan, including changes
resulting from additional information about IES becoming available to
MidAmerican.
On June 4, 1996, MidAmerican filed a new electric pricing proposal in Iowa
and Illinois. The proposal would reduce electric revenues by approximately $100
million over five years and eliminate automatic fuel adjustment clauses. The
proposal would provide MidAmerican more flexibility to negotiate with customers
who have service options and to mitigate strandable costs. Both states have
docketed the filings, and hearings in the cases are scheduled to begin in
October 1996.
On August 1, 1996, the Iowa Office of Consumer Advocate (the "OCA")
requested the IUB to order MidAmerican to reduce annual electric rates by 10.7%,
or approximately $101 million annually in Iowa electric revenues. MidAmerican
has asked the IUB to dismiss the OCA petition, citing that, among other things,
it fails to recognize the changes occurring in the electric utility industry.
Should the IUB docket the case and, after hearings on the case, order a decrease
in revenues, certain amounts collected subsequent to August 1, 1996, would be
subject to refund with interest.
MidAmerican has analyzed the issues asserted in the OCA's filing. Based
upon this analysis, it is management's opinion that the most likely outcome of
this filing, if it is ultimately heard by the IUB, should not differ materially
from the effect of the pricing plan proposed by MidAmerican.
REGULATORY APPROVALS
The consummation of the MidAmerican Proposed Merger and the Proposed
Wisconsin Transaction both would be subject to approval of the IUB, the ICC, the
NRC, the FERC, the expiration or termination of the applicable waiting period
under the HSR Act, and certain other miscellaneous filings. These are the only
material regulatory approvals required to effect the MidAmerican Merger. By
contrast, in addition to all of the foregoing required regulatory approvals, the
Proposed Wisconsin Transaction would also require approval from
17
<PAGE> 23
the Minnesota Public Utilities Commission and the Public Service Commission of
Wisconsin. IES and Interstate jointly filed an application for approval of the
Proposed Wisconsin Transaction by the IUB. Their application was subsequently
withdrawn and no approval has been granted by the IUB. If IES and Interstate
again file an application with the IUB, MidAmerican intends to intervene in the
IUB proceedings.
In light of the superior value of the MidAmerican Proposed Merger and the
benefits of the Regulatory Plan described above and with the cooperation of IES,
MidAmerican believes that it will be able to obtain the necessary regulatory
approvals for the MidAmerican Proposed Merger within 6 to 12 months after
execution of a definitive merger agreement with IES. According to the
IES/Interstate/WPL Joint Proxy Statement/Prospectus, as of the date of such
document IES anticipated the receipt of all necessary regulatory approvals for
the Proposed Wisconsin Transaction during the first half of 1997.
MATERIAL CONTACTS BETWEEN MIDAMERICAN AND IES
MidAmerican and Utilities own as tenants in common interests in the George
Neal Generating Station Unit No. 3 (MidAmerican: 72% or 370 megawatts;
Utilities: 28% or 144 megawatts) and the Ottumwa Generating Station
(MidAmerican: 52% or 372 megawatts; Utilities: 48% or 343 megawatts).
MidAmerican and IES also are common owners of the George Neal Generating Station
Unit No. 3 345 kilovolt transmission line. Also, each owns separate segments of
the Twin Cities-Iowa-St. Louis 345 kilovolt transmission line, and are common
owners along with another utility of a substation facility on that line. Also,
as a result of the contiguous nature of the MidAmerican and Utilities service
territories, the transmission facilities of each company are interconnected in
several locations. MidAmerican and Utilities have entered into inter-change
agreements concerning such interconnections.
SOURCE OF FUNDS
MidAmerican anticipates obtaining the funds necessary to purchase up to 40%
of the IES Shares for cash and to pay transaction expenses through primarily
short-term borrowings, although some borrowings may have maturities greater than
one year. Such borrowings will require regulatory approvals, which MidAmerican
will obtain in connection with obtaining regulatory approval of the MidAmerican
Proposed Merger.
18
<PAGE> 24
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MIDAMERICAN PROPOSED MERGER
The discussion below is limited to IES Shareholders who are U.S. citizens
or residents or domestic corporations and does not apply to IES Shareholders
(such as dealers in securities, insurance companies, financial institutions, and
tax-exempt organizations and trusts) that are subject to special tax regimes, or
to IES Shareholders who acquired IES Shares pursuant to the exercise of employee
stock options or rights or otherwise as compensation. IES Shareholders are urged
to consult their own tax advisors as to the specific tax consequences to them of
the MidAmerican Proposed Merger, including the effect of any state, local or
foreign tax laws.
The MidAmerican Proposed Merger is expected to be a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). As a result, for federal income tax purposes, (a) no gain or loss
would be recognized by MidAmerican or IES in the MidAmerican Proposed Merger,
(b) IES Shareholders who exchange their IES Shares solely for MidAmerican common
stock would not recognize any gain or loss, except to the extent of any cash
received in lieu of fractional shares of MidAmerican common stock and (c) IES
Shareholders who exchange their IES Shares solely for cash, or partly for cash
and partly for MidAmerican common stock, would generally realize gain or loss to
the extent of the difference between the amount of cash and the value of any
MidAmerican common stock received and such IES Shareholders' tax basis in the
IES Shares exchanged; however, any such gain would be recognized only to the
extent of cash received, and no loss would be recognized by an IES Shareholder
who exchanges his or her IES Shares partly for cash and partly for MidAmerican
common stock. The tax basis of the MidAmerican common stock received by an IES
Shareholder would be the same as the IES Shareholder's tax basis in the IES
Shares surrendered, reduced by the amount of any cash received by the IES
Shareholder (other than cash received in lieu of a fractional share of
MidAmerican common stock) and by any tax basis allocated to a fractional share
of MidAmerican common stock for which cash is received, and increased by the
amount of any gain recognized by such IES Shareholder (other than with respect
to a fractional share of MidAmerican common stock). The holding period of the
MidAmerican common stock received by an IES Shareholder would include the
holding period of the IES Shares surrendered therefor. Consummation of the
MidAmerican Proposed Merger would be dependent upon, among other conditions,
receipt by MidAmerican and IES of opinions of their respective counsel to the
effect that the MidAmerican Proposed Merger would be treated as a reorganization
within the meaning of Section 368(a) of the Code.
19
<PAGE> 25
DESCRIPTION OF MIDAMERICAN
MidAmerican is primarily engaged in the business of generating,
transmitting, distributing and selling electric energy and distributing, selling
and transporting natural gas. MidAmerican has two wholly-owned subsidiaries:
MidAmerican Capital Company ("MidAmerican Capital") and Midwest Capital Group,
Inc. ("Midwest Capital"). MidAmerican Capital engages in nonregulated
energy-related businesses. Midwest Capital conducts economic development
activities in its service territory.
MidAmerican distributes electric energy in Council Bluffs, Des Moines, Fort
Dodge, Iowa City, Sioux City and Waterloo, Iowa, the Quad-Cities (Davenport and
Bettendorf, Iowa and Rock Island, Moline and East Moline, Illinois) and a number
of adjacent communities and areas. MidAmerican distributes natural gas in Cedar
Rapids, Des Moines, Fort Dodge, Iowa City, Sioux City and Waterloo, Iowa, the
Quad-Cities, Sioux Falls, South Dakota; and a number of adjacent communities and
areas. The population of the Company's utility service territory is
approximately 1.7 million. As of December 31, 1995, MidAmerican had 635,000
retail electric customers and 601,000 natural gas customers.
MidAmerican has a residential, agricultural, commercial and diversified
industrial customer group, in which no single industry or customer accounted for
more than 3.5% (food and kindred products industry) of MidAmerican's total 1995
electric operating revenues or 3.6% (food and kindred products industry) of its
total 1995 gas operating margin. Among the primary industries served by
MidAmerican are those which are concerned with the manufacturing, processing and
fabrication of primary metals, real estate, food products, farm and other
non-electrical machinery, and cement and gypsum products. For the year ended
December 31, 1995, MidAmerican derived approximately 64% of its gross operating
revenues from its electric business and 27% from its gas business.
MidAmerican, an Iowa corporation, was organized in 1995 to facilitate the
merger of Iowa-Illinois, Midwest Resources and Midwest Power Systems Inc. The
merger was accounted for as a pooling of interests. MidAmerican's corporate
headquarters is located at 666 Grand Avenue, Des Moines, Iowa 50303 and its
telephone number is (515) 242-4300.
In January 1996, MidAmerican's board of directors (the "MidAmerican Board")
approved an Agreement and Plan of Exchange related to the formation of
MidAmerican Energy Holdings Company ("Holdings"), a holding company. Holdings
initially will have three wholly-owned subsidiaries, MidAmerican (utility
operations), MidAmerican Capital and Midwest Capital. Upon receipt from the ICC
of an order approving the holding company structure, each share of MidAmerican
common stock will be exchanged for one share of Holdings common stock. It is
MidAmerican's intent, if possible, to complete the formation of the holding
company and share exchange by the end of 1996. MidAmerican anticipates that any
agreement providing for a business combination between MidAmerican and IES would
contain sufficient flexibility to consummate the planned holding company
reorganization and a transaction similar to the MidAmerican Proposed Merger.
Certain information concerning the directors and executive officers of
MidAmerican and other representatives of MidAmerican who may solicit proxies
from IES Shareholders is set forth in Annex A hereto. Certain information
concerning the IES Shares held by the persons described in the preceding
sentence and by MidAmerican, and certain transactions between any of them and
IES, is set forth in Annex B hereto.
20
<PAGE> 26
CAPITALIZATION OF MIDAMERICAN
The following table sets forth the capitalization of MidAmerican and its
subsidiaries as of June 30, 1996.
<TABLE>
<CAPTION>
AUTHORIZED OUTSTANDING
------------ ------------
<S> <C> <C>
Common Shares............................................. 350,000,000 100,751,713
Preferred Shares.......................................... 100,000,000
Preferred Shares, Not Subject to Mandatory Redemption:
$3.30 Series............................................ 49,523
$3.75 Series............................................ 38,320
$3.90 Series............................................ 32,630
$4.20 Series............................................ 47,369
$4.35 Series............................................ 49,950
$4.40 Series............................................ 50,000
$4.80 Series............................................ 49,898
$1.7375 Series.......................................... 1,931,000
-----------
2,248,690
-----------
Preferred Shares, Subject to Mandatory Redemption:
$5.25 Series............................................ 100,000
$7.80 Series............................................ 400,000
-----------
500,000
-----------
2,748,690
===========
</TABLE>
DESCRIPTION OF IES
IES, incorporated under the laws of the State of Iowa in 1986, is a holding
company for Utilities and for IES Diversified Inc. ("Diversified"), the parent
corporation for most of IES' non-utility business. Utilities is a public utility
engaged principally in generating, purchasing, distributing and selling electric
energy in portions of the state of Iowa. Utilities also purchases, distributes,
transports and sells natural gas in its service territory. The shares of
Utilities preferred stock are currently registered under Section 12(g) of the
Exchange Act and, as such, Utilities is required to make periodic and other
filings with the SEC. It is expected that the Utilities preferred stock would
remain outstanding and unchanged as a result of the MidAmerican Proposed Merger
and that Utilities, as a subsidiary of MidAmerican, would remain a reporting
company under the Exchange Act. Diversified and its subsidiaries engaged in
various non-utility operations, including oil and natural gas production and
marketing, energy services, railroad and other transportation services in the
Midwestern region of the United States, and local real estate development. The
principal executive office of IES is located at IES Tower, 200 First Street
S.E., Cedar Rapids, Iowa 52401 and its telephone number is 319-398-4411.
VOTING OF PROXY CARDS
GENERAL
Only IES Shareholders of record on July 10, 1996 are eligible to vote. Any
IES Shareholder owning IES Shares held in the name of a brokerage firm, bank, or
other institution should sign, date and mail the BLUE proxy card to such
brokerage firm, bank or other institution in the envelope provided by that firm.
The accompanying BLUE proxy card will be voted in accordance with the IES
Shareholders' instructions on such BLUE proxy card.
21
<PAGE> 27
REVOCATION OF PROXIES
An executed proxy may be revoked at any time prior to its exercise by
submitting another proxy with a later date, by appearing in person at the Annual
Meeting and voting or by sending a written, signed and dated revocation which
clearly identifies the proxy being revoked to either (a) MidAmerican in care of
D.F. King & Co., Inc., 77 Water Street, New York, New York 10005, or (b) the
principal executive offices of IES at 200 First Street S.E., Cedar Rapids, Iowa
52406. A revocation may be in any written form validly signed by the record
holder as long as it clearly states that the proxy previously given is no longer
effective. MidAmerican requests that a copy of any revocation sent to IES also
be sent to MidAmerican in care of D.F. King & Co., Inc. at the above address so
that MidAmerican may more accurately determine if and when proxies have been
received from the holders of record on the Record Date.
IF YOU HAVE ALREADY SENT A WHITE OR GREEN PROXY CARD TO THE IES DIRECTORS,
YOU MAY REVOKE THAT PROXY AND VOTE AGAINST THE ADOPTION AND APPROVAL OF THE
WISCONSIN MERGER AGREEMENT AND THE PROPOSED WISCONSIN TRANSACTION BY SIGNING,
DATING AND MAILING THE ENCLOSED BLUE PROXY CARD. THE LATEST DATED PROXY IS THE
ONLY ONE THAT COUNTS.
MATTERS TO BE VOTED ON AT THE ANNUAL MEETING
The Wisconsin Merger Agreement and the Proposed Wisconsin Transaction
IES Shareholders (i) may vote against the approval and adoption of the
Wisconsin Merger Agreement and the Proposed Wisconsin Transaction or (ii) may
withhold their vote or (iii) may vote for such approval and adoption by marking
the proper box on the BLUE proxy and signing, dating and returning it promptly
in the enclosed postage-paid envelope. If an IES Shareholder returns a BLUE
proxy card that is signed, dated and not marked, that IES Shareholder will be
deemed to have voted against approval and adoption of the Wisconsin Merger
Agreement and the Proposed Wisconsin Transaction.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, each
IES Share is entitled to one vote upon each matter presented at the Annual
Meeting. A majority of the votes entitled to be cast by holders of IES Shares,
represented in person or by proxy, shall constitute a quorum for each matter
presented at the Annual Meeting. Abstentions and broker non-votes (i.e., proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owners or other persons entitled to vote shares
as to a matter with respect to which brokers or nominees do not have
discretionary power to vote) will be considered present for the purpose of
establishing a quorum. If a quorum is present, (i) the affirmative vote of a
majority of the votes entitled to be cast by the holders of the IES Shares
entitled to vote thereon is required for approval of the Wisconsin Merger
Agreement, and (ii) the affirmative vote of a majority of the votes entitled to
be cast by the holders of IES Shares represented at the Annual Meeting and
entitled to vote thereon is required for the election of directors. Under the
Iowa Business Corporation Act (the "IBCA"), in determining whether the Wisconsin
Merger Agreement and the nominees for directors have received the requisite
number of affirmative votes, abstentions and broker non-votes will have the same
effect as votes cast against approval of the Wisconsin Merger Agreement. Failure
to return a proxy or to vote in person at the Annual Meeting will also have the
effect of a vote against the Wisconsin Merger Agreement. Abstentions and broker
non-votes with respect to the election of directors will not be counted.
MIDAMERICAN URGES YOU TO VOTE AGAINST THE APPROVAL AND ADOPTION OF THE
WISCONSIN MERGER AGREEMENT AND THE PROPOSED WISCONSIN TRANSACTION IN ORDER TO
PRESERVE YOUR OPPORTUNITY TO CONSIDER THE MIDAMERICAN PROPOSED MERGER, WHICH
MIDAMERICAN BELIEVES IS FINANCIALLY SUPERIOR TO THE PROPOSED WISCONSIN
TRANSACTION.
IF YOU WANT TO HAVE AN OPPORTUNITY TO CONSIDER THE MIDAMERICAN PROPOSED
MERGER, VOTE AGAINST THE APPROVAL AND ADOPTION OF THE WISCONSIN MERGER AGREEMENT
AND THE PROPOSED WISCONSIN TRANSACTION BY SIGNING, DATING AND MAILING THE
ENCLOSED BLUE PROXY CARD TODAY.
22
<PAGE> 28
Additional Proposals to be Considered at the Annual Meeting
As set forth in the IES/Interstate/WPL Joint Proxy Statement/Prospectus, at
the Annual Meeting, IES Shareholders will be asked to approve (in addition to
the Wisconsin Merger Agreement and the Proposed Wisconsin Transaction) (i) the
election of nine director candidates named in the IES/Interstate/WPL Joint Proxy
Statement/Prospectus (the "Director Proposal"), and (ii) such other matters as
may properly come before the Annual Meeting or any adjournment or postponement
thereof. MidAmerican is not making any recommendations on the Director Proposal.
The accompanying BLUE proxy card will be voted in accordance with your
instructions on such card. You may vote for approval of the Director Proposal or
vote against, or abstain from voting on, the approval of the Director Proposal
by marking the proper box on the BLUE proxy card. IF NO MARKING IS MADE, YOU
WILL BE DEEMED TO HAVE GIVEN A DIRECTION TO ABSTAIN FROM VOTING THE SHARES
REPRESENTED BY THE BLUE PROXY CARD WITH RESPECT TO THE APPROVAL OF THE DIRECTOR
PROPOSAL.
Other Matters
EXCEPT AS SET FORTH ABOVE, MIDAMERICAN IS NOT AWARE OF ANY OTHER MATTERS TO
BE BROUGHT BEFORE THE ANNUAL MEETING. SHOULD OTHER MATTERS BE BROUGHT BEFORE THE
ANNUAL MEETING, THE PERSONS NAMED ON THE BLUE PROXY CARD WILL ABSTAIN FROM
VOTING ON SUCH MATTERS UNLESS SUCH MATTERS ADVERSELY AFFECT THE INTERESTS OF
MIDAMERICAN AS DETERMINED BY MIDAMERICAN IN ITS SOLE DISCRETION, IN WHICH EVENT
SUCH PERSONS WILL VOTE ON SUCH MATTERS AT THEIR DISCRETION.
DISSENTERS' RIGHTS
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, the
IBCA provides dissenters' rights for IES shareholders who object to the Proposed
Wisconsin Transaction and meet the requisite statutory requirements contained in
Sections 490.1301 through 490.1331 of the IBCA. Sections 490.1301 through
490.1331 of the IBCA are reprinted in their entirety as Annex P to the
IES/Interstate/WPL Joint Proxy Statement/Prospectus.
An IES Shareholder may dissent as to less than all of the IES Shares
registered in the name of such IES Shareholder only if such IES Shareholder
dissents with respect to all IES Shares beneficially owned by any one person and
notifies IES in writing of the name and address of each person on whose behalf
such IES Shareholder asserts dissenters' rights. The rights of a partial
dissenter are determined as if the IES Shares as to which the IES Shareholder
dissents and such IES Shareholder's other IES Shares were registered in the
names of different IES Shareholders. A beneficial IES Shareholder may assert
dissenters' rights as to IES Shares held on such IES Shareholder's behalf only
if such IES Shareholder (i) submits to IES the record IES Shareholder's written
consent to the dissent not later than the time the beneficial IES Shareholder
asserts dissenters' rights and (ii) asserts dissenters' rights with respect to
all IES Shares of which the IES Shareholder is the beneficial shareholder or
over which such beneficial IES Shareholder has the power to direct the vote.
The IBCA requires that an IES Shareholder who wishes to assert dissenter's
rights (i) deliver to IES, before the vote is taken, written notice of the IES
Shareholder's intent to demand payment for IES Shares if the Proposed Wisconsin
Transaction is consummated and (ii) not vote such IES Shares in favor of the
Wisconsin Merger Agreement. Any such notice by IES Shareholders must be received
by IES at IES Tower, 200 First Street S.E., Cedar Rapids, Iowa 52401, Attention:
Stephen W. Southwick, Vice President, General Counsel and Secretary, prior to
such vote. A vote against the Wisconsin Merger Agreement will not satisfy the
notice requirement. The submission by an IES Shareholder of a blank proxy card
or one voted in favor of the Wisconsin Merger Agreement (if not revoked) will
count as a vote in favor of the Wisconsin Merger
23
<PAGE> 29
Agreement and will serve to waive dissenters' rights. However, failure to return
a proxy or to vote against or abstain from voting will not serve to waive such
rights.
Within ten days after the date on which the Wisconsin Merger Agreement is
approved by the IES Shareholders, IES must deliver a written dissenters' notice
to all IES Shareholders that have given a written notice and not voted in favor
of the Wisconsin Merger Agreement in accordance with the preceding paragraph.
The dissenters' notice will (i) state where the payment demand must be sent and
where and when certificates for shares of capital stock must be deposited, (ii)
supply a form for demanding payment that includes the date of the first
announcement to the news media or to shareholders of the terms of the Proposed
Wisconsin Transaction and which requires that the IES Shareholder asserting
dissenters' rights certify whether or not such IES Shareholder acquired
beneficial ownership of the IES Shares before such date, (iii) set a date by
which IES must receive the payment demand, which date will be not less than 30
nor more than 60 days from the date such dissenters' notice is delivered, and
(iv) be accompanied by the relevant sections of the IBCA.
An IES Shareholder who has received a dissenters' notice as described above
and who wishes to assert dissenters' rights must demand payment, certify whether
the IES Shareholder acquired beneficial ownership of the IES Shares before the
date set forth in the dissenters' notice and deposit the certificate
representing the IES Shares in accordance with the terms of the notice. An IES
Shareholder who does not demand payment or deposit the IES Shareholder's share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for the IES Shareholder's shares.
Upon receipt of the payment demand, or at the effective time of the
Proposed Wisconsin Transaction, whichever occurs later, Interstate Energy must
pay each dissenting IES Shareholder that has complied with the provisions of the
IBCA the amount estimated to be the fair value of the dissenter's IES Shares,
plus accrued interest from such effective time to the date of payment at the
average rate paid by Interstate Energy on its bank loans or, if none, at a rate
that is fair and equitable under all the circumstances. Such payment must be
accompanied by certain financial data relating to Interstate Energy and other
specified information as required by the IBCA. If the Proposed Wisconsin
Transaction is not effected within 60 days after the date set for demanding
payment and depositing the IES Share certificates, IES will return the deposited
certificates and, if the Proposed Wisconsin Transaction is subsequently
effected, Interstate Energy will deliver a new dissenters' notice as if the
corporate action was taken without the vote of the shareholders and repeat the
payment demand procedure. Interstate Energy may elect to withhold payment from a
dissenting IES Shareholder unless the dissenting IES Shareholder was the
beneficial owner of the IES Shares before the date set forth in the dissenters'
notice as the date of the first announcement of the terms of the Proposed
Wisconsin Transaction. If Interstate Energy so elects to withhold payment, it
must, after the effective time of the Proposed Wisconsin Transaction, estimate
the fair value of the IES Shares, plus accrued interest at the rate described
above, and pay such amount and provide certain other specified information as
set forth in the IBCA to each such dissenting IES Shareholder who agrees to
accept it in full satisfaction of the dissenter's demand.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, IES
Shareholders considering seeking dissenters' rights should be aware that the
"fair value" of their IES Shares determined under Sections 490.1301 through
490.1331 of the IBCA could be more than, the same as or less than the market
value of such securities and that opinions of investment banking firms as to
fairness, from a financial point of view, may not provide a reliable guide to
fair value under Sections 490.1301 through 490.1331. If (i) the dissenter
believes that the amount offered or paid is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated, (ii)
Interstate Energy fails to make payment within 60 days after the date set for
demanding payment, or (iii) IES, having failed to effect the Proposed Wisconsin
Transactions, does not return the deposited certificates within 60 days after
the date set for demanding payment, dissenters may, within 30 days after the
payment was made or offered, notify Interstate Energy or IES, as the case may
be, in writing of the dissenting IES Shareholder's own estimate of the fair
value of the IES Shares and the amount of interest due, and demand payment of
the fair value of such IES Shares and interest so calculated less payments
received by such dissenting IES Shareholder, if any. A dissenter waives the
right to demand payment as described in this paragraph unless the dissenter
notifies Interstate Energy of the dissenter's demand within 30 days after
Interstate Energy made or offered payment for the dissenter's IES Shares. If
24
<PAGE> 30
demand of a dissenter for payment remains unsettled, Interstate Energy must (i)
commence a proceeding in the Iowa District Court for Linn County, Iowa, within
60 days after receiving the payment demand to determine the fair value of the
shares and accrued interest or (ii) pay to each such dissenter the amount
demanded. The costs of a proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court, will generally be assessed
against Interstate Energy. The court may, however, assess such court costs,
including the fees and expenses of counsel and experts, against a dissenter that
is found by the court to have acted arbitrarily, vexatiously or not in good
faith in demanding payment.
OWNERSHIP OF SHARES
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus, (i)
each IES Share is entitled to one vote on the Wisconsin Merger Agreement and the
Proposed Wisconsin Transaction, (ii) as of the Record Date, 29,923,233 IES
Shares were outstanding, (iii) the affirmative vote of a majority of the votes
entitled to be cast by the holders of IES Shares entitled to vote thereon is
required for approval of the Wisconsin Merger Agreement and the Proposed
Wisconsin Transaction, and (iv) the affirmative vote of a majority of the votes
entitled to be cast by the holders of IES Shares represented in person or by
proxy at the Annual Meeting and entitled to vote thereon is required for the
election of directors.
The following table sets forth, as of June 1, 1996, the number of IES
Shares beneficially owned by each person known by MidAmerican to own 5% or more
of the outstanding IES Shares as of June 1, 1996. The information contained in
the table is copied from information contained in the IES/Interstate/WPL Joint
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------------------------------------------------------- -------------------------- --------
<S> <C> <C>
WPL.......................................................... 5,861,115 16.4%
Interstate................................................... 5,861,115 16.4%
</TABLE>
- ---------------
(1) By reason of the Stock Option Agreements, each of Interstate and WPL may be
deemed to have sole voting and dispositive power with respect to the IES
Shares listed above which are subject to their respective Options from IES
and, accordingly, each of Interstate and WPL may be deemed to beneficially
own all of such IES Shares (assuming exercise of its Option and the
nontriggering of the other party's right to exercise its Option for IES
Shares). However, each of Interstate and WPL expressly disclaim any
beneficial ownership of such shares because the Options are exercisable only
in certain circumstances.
The following table sets forth, as of June 1, 1996, the number of IES
Shares beneficially owned by each director, the chief executive officer and each
of the four other most highly compensated executive officers (and by all
directors and officers as a group) of IES. The information contained in the
table is copied from information contained in the IES/Interstate/WPL Joint Proxy
Statement/Prospectus.
25
<PAGE> 31
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS
- ------------------------------------------------------------- -------------------------- --------
<S> <C> <C>
C.R.S. Anderson.............................................. 19,000 .06%
J. Wayne Bevis............................................... 500 (2)
Blake O. Fisher, Jr.......................................... 16,415 .05%
John F. Franz, Jr............................................ 14,492 .05%
James E. Hoffman............................................. 5,000 .02%
Lee Liu...................................................... 44,638 .15%
Rene H. Males................................................ 6,712 .02%
Jack R. Newman............................................... 0 (2)
Robert D. Ray................................................ 1,500 (2)
David Q. Reed................................................ 4,002 .01%
Larry D. Root................................................ 17,470 .06%
Henry Royer.................................................. 1,925 (2)
Robert W. Schultz............................................ 1,399 (2)
Anthony R. Weiler............................................ 2,335 (2)
All Executive Officers and Directors of IES and Utilities as
a group (20 persons)....................................... 168,556 .56%
</TABLE>
- ---------------
(1) Includes ownership of shares by family members even though beneficial
ownership of such shares may be disclaimed.
(2) Less than .01% of the Class (IES Common Stock).
Other than the Wisconsin Merger Agreement, MidAmerican is not aware of any
arrangements which may result in a change in control of IES.
THE INFORMATION CONCERNING IES AND THE PROPOSED WISCONSIN TRANSACTION
CONTAINED IN THIS PROXY STATEMENT HAS BEEN TAKEN FROM OR IS BASED UPON DOCUMENTS
AND RECORDS ON FILE WITH THE SEC AND OTHER PUBLICLY AVAILABLE INFORMATION.
MIDAMERICAN HAS NO KNOWLEDGE THAT WOULD INDICATE THAT STATEMENTS RELATING TO IES
CONTAINED IN THIS PROXY STATEMENT IN RELIANCE UPON PUBLICLY AVAILABLE
INFORMATION ARE INACCURATE OR INCOMPLETE. MIDAMERICAN, HOWEVER, HAS NOT BEEN
GIVEN ACCESS TO THE BOOKS AND RECORDS OF IES, WAS NOT INVOLVED IN THE
PREPARATION OF SUCH INFORMATION AND STATEMENTS, AND IS NOT IN A POSITION TO
VERIFY, OR MAKE ANY REPRESENTATION WITH RESPECT TO THE ACCURACY OF, ANY SUCH
INFORMATION OR STATEMENTS.
The IES/Interstate/WPL Joint Proxy Statement/Prospectus contains additional
information concerning the IES Shares, beneficial ownership of the IES Shares
by, and other information concerning, IES' directors and officers, compensation
paid to executive officers, and the principal holders of IES Shares.
If the MidAmerican Proposed Merger were completed, IES Shareholders would
own between approximately 29% and 41% of the outstanding MidAmerican common
stock, depending on the percentage of IES Shareholders that elect to receive
cash for their IES Shares.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus,
proposals of IES Shareholders intended to be presented at the 1997 IES Annual
Meeting must be received at IES' Corporate Secretary's Office on or before
November 20, 1996 for consideration for inclusion in the proxy statement and
form of proxy relating to that meeting.
SOLICITATION OF PROXIES
Proxies will be solicited by mail, telephone, telegraph, telex, telecopier
and other electronic means and by advertisement and in person. Solicitation may
be made by directors, executive officers and other representatives of
MidAmerican. See Annex A hereto for a listing of such persons.
The entire expense of MidAmerican's solicitation of proxies for the Annual
Meeting is being borne by MidAmerican. MidAmerican estimates that it has spent
approximately $500,000 to date in connection with
26
<PAGE> 32
the solicitation of proxies from IES Shareholders and that its total
expenditures for such solicitations will be approximately $2,000,000.
MidAmerican has retained D.F. King & Co., Inc. ("D.F. King") to assist and to
provide advisory and proxy solicitation services in connection with the Proxy
Solicitation for which D.F. King will be paid a customary fee of not more than
$400,000 and will be reimbursed for reasonable out-of-pocket expenses. D.F. King
will utilize approximately 100 individuals in the solicitation of proxies.
MidAmerican will indemnify D.F. King against certain liabilities and expenses in
connection with the Proxy Solicitation, including liabilities under the federal
securities law.
Banks, brokerage houses and other custodians, nominees and fiduciaries will
be requested to forward the solicitation materials to the beneficial owners of
IES Shares for which they hold of record, and MidAmerican will reimburse them
for their reasonable out-of-pocket expenses.
Pursuant to a letter agreement dated August 2, 1996, as amended (the
"Letter Agreement"), Dillon, Read & Co. Inc. ("Dillon Read") is providing
certain financial advisory services to MidAmerican in connection with the
proposed MidAmerican Proposed Merger. Under the Letter Agreement, MidAmerican
has agreed to pay Dillon Read for its financial advisory services in connection
with the MidAmerican Proposed Merger a financial advisory fee of (i) $500,000
upon execution of the Letter Agreement, (ii) $1,000,000 upon the public
announcement of a proposal by MidAmerican to acquire IES, (iii) $500,000 on the
six month anniversary of the Letter Agreement, and (iv) $5,160,000 less any fees
paid pursuant to (i), (ii) and (iii) above, upon consummation of an acquisition
of IES. MidAmerican has also agreed to reimburse Dillon Read for its reasonable
out-of-pocket expenses, including the fees and expenses of its legal counsel
incurred in connection with its engagement, and has agreed to indemnify each of
Dillon Read and certain related persons and entities against certain liabilities
and expenses in connection with Dillon Read's engagement, including certain
liabilities under the federal securities laws. In connection with Dillon Read's
engagement as financial advisor, MidAmerican anticipates that certain employees
of Dillon Read may communicate in person, by telephone or otherwise with a
limited number of institutions, brokers or other persons who are IES
Shareholders for the purpose of assisting in the Proxy Solicitation. Dillon Read
will not receive any fee for or in connection with such solicitation activities
by its employees apart from the fees it is otherwise entitled to receive as
described above. Dillon Read has in the past rendered and is currently rendering
various investment banking and financial advisory services for MidAmerican, for
which it has received and will receive customary compensation.
The expenses related to the Proxy Solicitation will be borne by
MidAmerican. MidAmerican has not determined whether to seek reimbursement from
IES of its expenses related to the Proxy Solicitation.
If you have any questions concerning the Proxy Solicitation or the
procedures to be followed to execute and deliver a proxy, please contact D.F.
King at the address or phone number specified below.
YOUR PROXY AND PROMPT ACTION ARE IMPORTANT. YOU ARE URGED TO GRANT YOUR
PROXY BY SIGNING, DATING AND MAILING PROMPTLY THE ENCLOSED BLUE PROXY CARD.
PLEASE ACT TODAY.
If you have any questions or need assistance in voting your shares, please
call D. F. King or MidAmerican at the telephone numbers listed below:
D.F. KING & CO., INC.
BANKS AND BROKERS CALL (212) 269-5550
MIDAMERICAN ENERGY COMPANY
CALL TOLL-FREE: 1-888-776-4692
27
<PAGE> 33
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary below sets forth selected historical financial data and
selected unaudited pro forma financial data. The pro forma amounts included in
the summary set forth below assume completion of the MidAmerican Proposed
Merger, in which IES Shareholders in the aggregate would receive up to 40% cash
and the remainder in MidAmerican common stock. IES Shareholders receiving cash
would receive $39.00 per share and IES Shareholders electing stock would receive
2.346 shares of MidAmerican common stock for each IES Share. The pro forma
amounts included in the summary set forth below also assume payment by IES of
aggregate termination fees in connection with the termination of the Proposed
Wisconsin Transaction in the amount of $40,000,000. See "Background of the
Solicitation -- The Wisconsin Merger Agreement." This financial data set forth
below should be read in conjunction with the historical consolidated financial
statements and related notes thereto of MidAmerican and IES contained in the
respective Annual Reports on Form 10-K of MidAmerican and IES which are
incorporated by reference herein, and in conjunction with the Pro Forma Combined
Financial Information (unaudited) and related notes thereto of MidAmerican
included elsewhere in this Proxy Statement.
SELECTED CONSOLIDATED FINANCIAL DATA OF MIDAMERICAN AND IES
The selected historical consolidated financial data of MidAmerican and IES
for the five years ended December 31, 1995, set forth below, have been derived
from audited financial statements. The selected historical financial data of
MidAmerican and IES for the six months ended June 30, 1996, and June 30, 1995,
set forth below, have been derived from unaudited financial statements.
28
<PAGE> 34
SELECTED CONSOLIDATED FINANCIAL DATA
MIDAMERICAN ENERGY COMPANY
<TABLE>
<CAPTION>
SIX SIX
MONTHS MONTHS
ENDED ENDED
JUNE 30, JUNE 30, YEAR ENDED DECEMBER 31,
---------- ---------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues................... $1,004,779 $ 833,134 $1,723,644 $1,690,910 $1,682,935 $1,491,058 $1,488,563
Operating income(1).................. 175,398 135,153 301,132 273,606 280,896 217,710 278,121
Other income (deductions)(2)......... 21,844 23,212 17,212 37,327 54,349 17,818 32,370
Preferred dividends.................. 4,661 4,563 8,059 10,551 8,367 8,735 9,708
Earnings on common stock from
continuing operations.............. 79,128 59,688 122,347 125,834 139,338 79,350 118,261
Earnings per common share from
continuing operations.............. $ 0.79 $ 0.59 $ 1.22 $ 1.28 $ 1.43 $ 0.83 $ 1.32
Cash dividends declared per share.... $ 0.60 $ 0.58 $ 1.18 $ 1.17 $ 1.17 $ 1.28 $ 1.38
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, JUNE 30, --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......................... $4,432,700 $4,365,480 $4,523,521 $4,415,774 $4,371,261 $4,114,016 $3,910,669
Long-term obligations................ 1,469,811 1,471,067 1,468,617 1,471,127 1,407,374 1,401,736 1,362,376
Power purchase obligation............ 125,729 137,809 125,729 137,809 151,485 146,150 150,838
Short-term borrowings................ 164,490 102,300 184,800 124,500 173,035 120,244 67,629
Preferred stock:
Not subject to mandatory
redemption....................... 78,577 89,955 89,945 89,955 109,871 74,242 74,291
Subject to mandatory redemption.... 50,000 50,000 50,000 50,000 50,000 48,625 79,200
Common stock equity.................. 1,242,588 1,223,826 1,225,715 1,204,112 1,180,510 1,159,676 1,128,858
Book value per common share.......... $ 12.33 $ 12.15 $ 12.17 $ 12.08 $ 12.07 $ 11.86 $ 12.12
</TABLE>
- ---------------
(1) Operating Income for 1995 includes $31.9 million of costs related to a
restructuring and work force reduction plan.
(2) Other Income (Deductions) for 1995 include approximately $18 million of
expense for the write-down of certain nonregulated assets. Other Income
(Deductions) for 1993 includes an $18.5 million pre-tax gain on an exchange
of natural gas service territory.
29
<PAGE> 35
SELECTED CONSOLIDATED FINANCIAL DATA
IES INDUSTRIES INC.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED JUNE ENDED JUNE
30, 30, YEAR ENDED DECEMBER 31,
---------- ---------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues................ $ 453,844 $ 395,839 $ 851,010 $ 785,864 $ 801,266 $ 678,296 $ 661,538
Operating income.................. 63,764 55,571 151,712 147,933 151,269 109,024 103,357
Other income (deductions)......... 3,753 2,423 6,594 7,382 (936) 10,672 5,786
Preferred dividends............... 457 457 914 914 914 1,729 2,170
Earnings on common stock from
continuing operations........... 22,151 19,248 64,176 66,818 67,938 48,711 44,657
Earnings per common share from
continuing operations........... $ 0.75 $ 0.66 $ 2.20 $ 2.34 $ 2.45 $ 1.92 $ 1.85
Cash dividends declared per
share........................... $ 1.05 $ 1.05 $ 2.10 $ 2.10 $ 2.10 $ 2.10 $ 2.03
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, JUNE 30, --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets...................... $2,086,307 $1,924,756 $2,054,291 $1,904,593 $1,749,619 $1,637,382 $1,485,092
Long-term obligations............. 668,461 599,275 654,090 623,359 574,488 551,335 506,218
Short-term borrowings............. 125,000 87,000 101,000 37,000 24,000 92,000 40,900
Preferred stock:
Not subject to mandatory
redemption.................... 18,320 18,320 18,320 18,320 18,320 18,320 29,194
Common stock equity............... 611,931 589,899 612,346 591,783 572,051 482,729 463,296
Book value per common share....... $ 20.74 $ 20.50 $ 20.75 $ 20.56 $ 20.21 $ 18.89 $ 19.07
</TABLE>
30
<PAGE> 36
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The selected unaudited pro forma financial data combines the historical
consolidated balance sheets of MidAmerican and IES as if the MidAmerican
Proposed Merger had been consummated at the end of the period shown and combines
the statements of income of MidAmerican and IES as if the MidAmerican Proposed
Merger had been consummated at the beginning of the period shown, in each case
after giving effect to the MidAmerican Proposed Merger under the purchase method
of accounting. The selected unaudited pro forma financial data does not reflect
any potential cost reductions or synergies associated with the MidAmerican
Proposed Merger and is not necessarily indicative of the operating results or
financial position that would have occurred had the MidAmerican Proposed Merger
been consummated on the dates for which the MidAmerican Proposed Merger is being
given effect, nor is it necessarily indicative of future operating results or
financial position.
31
<PAGE> 37
SELECTED PRO FORMA COMBINED FINANCIAL DATA
MIDAMERICAN ENERGY COMPANY -- MERGED
ASSUMING HOLDERS OF 40% OF IES COMMON STOCK ELECT TO RECEIVE CASH
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
1996 1995
---------- ------------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
INCOME STATEMENT DATA:
Operating revenues............................................... $1,458,623 $2,574,654
Operating income (1) (5)......................................... 233,183 440,886
Other income (deductions) (2).................................... 25,597 23,806
Preferred dividends.............................................. 5,118 8,973
Earnings on common stock from continuing operations (6)(10)...... 86,313 156,592
Earnings per common share from continuing operations (7)(10)..... $ 0.60 $ 1.10
Cash dividends per share (9)..................................... $ 0.60 $ 1.20
Payout ratio (9)(10)............................................. 1.00 1.09
BALANCE SHEET DATA:
Total assets (3) (8)............................................. $7,268,245
Long-term obligations............................................ 2,138,272
Power purchase obligation........................................ 125,729
Short-term borrowings (4)........................................ 826,281
Preferred stock:
Not subject to mandatory redemption........................... 96,897
Subject to mandatory redemption............................... 50,000
Common stock equity.............................................. 1,942,833
Book value per common share (7).................................. $ 13.60
</TABLE>
- ---------------
(1) Operating income includes $31.9 million of costs related to a restructuring
and work force reduction plan implemented and completed in 1995.
(2) Other income (deductions) for 1995 include approximately $18 million of
expense for the write-down of certain nonregulated assets.
(3) Reflects adjustment to fair value of certain assets and liabilities and
goodwill.
(4) Reflects additional short-term borrowings of $536,791,000.
(5) Reflects amortization of the goodwill over a 40 year period which increases
operating expenses by $12.0 million per year.
(6) Reflects additional interest on the additional short-term borrowings at
5.675% annually and the related income tax benefit at 41%.
(7) Reflects the exchange of 17,954,000 IES Shares (60% of the total IES
Shares) for 42,120,000 shares of MidAmerican common stock.
(8) Reflects the exchange of 11,969,000 IES Shares (40% of the total IES
Shares) for $466,791,000 of cash.
(9) Reflects current MidAmerican dividend rate, not actual dividends declared
by MidAmerican and IES.
(10) Pro forma amounts do not give effect to the synergies of the MidAmerican
Proposed Merger. See Notes to Pro Forma Combined Balance Sheet and
Statements of Income for additional information regarding the pro forma
adjustments.
32
<PAGE> 38
SELECTED PRO FORMA COMBINED FINANCIAL DATA
MIDAMERICAN ENERGY COMPANY -- MERGED
ASSUMING NO HOLDERS OF IES COMMON STOCK ELECT TO RECEIVE CASH
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------- ------------
1996 1995
---------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C>
INCOME STATEMENT DATA:
Operating revenues........................................... $1,458,623 $2,574,654
Operating income(1)(5)....................................... 233,183 440,886
Other income (deductions)(2)................................. 25,597 23,806
Preferred dividends.......................................... 5,118 8,973
Earnings on common stock from continuing operations(6)(9).... 94,128 172,221
Earnings per common share from continuing operations(7)(9)... $ 0.55 $ 1.01
Cash dividends per share(8).................................. $ 0.60 $ 1.20
Payout ratio(9).............................................. 1.09 1.19
BALANCE SHEET DATA:
Total assets(3).............................................. $7,268,267
Long-term obligations........................................ 2,138,272
Power purchase obligation.................................... 125,729
Short-term borrowings(4)..................................... 359,490
Preferred Stock:
Not subject to mandatory redemption....................... 96,897
Subject to mandatory redemption........................... 50,000
Common stock equity.......................................... 2,409,646
Book value per common share(7)............................... $ 14.10
</TABLE>
- ---------------
(1) Operating income includes $31.9 million of costs related to a restructuring
and work force reduction plan implemented and completed in 1995.
(2) Other income (deductions) for 1995 include approximately $18 million of
expense for the write-down of certain nonregulated assets.
(3) Reflects adjustments to fair value of certain assets and liabilities and
goodwill.
(4) Reflects additional short-term borrowings of $70,000,000.
(5) Reflects amortization of the goodwill over a 40 year period which increases
operating expenses by $12.0 million per year.
(6) Reflects additional interest on the additional short-term borrowings at
5.675% annually and the related income tax benefit at 41%.
(7) Reflects the exchange of all 29,923,000 IES Shares for 70,199,000 shares of
MidAmerican common stock.
(8) Reflects current MidAmerican dividend rate, not actual dividends declared by
MidAmerican and IES.
(9) Pro forma amounts do not give effect to the synergies of the MidAmerican
Proposed Merger. See Notes to Pro Forma Combined Balance Sheet and
Statements of Income for additional information regarding the pro forma
adjustments.
33
<PAGE> 39
COMPARATIVE BOOK VALUES, DIVIDENDS AND EARNINGS
PER SHARE OF COMMON STOCK
ASSUMING HOLDERS OF 40% OF IES COMMON STOCK ELECT TO RECEIVE CASH
The MidAmerican pro forma earnings and book value per share amounts are
computed by dividing the combined actual amounts by the pro forma shares
outstanding. The IES pro forma per share amounts are computed by multiplying the
MidAmerican pro forma per share amounts by the exchange ratio of 2.346.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
IES Per Share of Common Stock Amounts
Book Value as of June 30, 1996............................... $20.74 $ 31.91
Book Value as of December 31, 1995........................... $20.75 $ 31.62
Cash Dividends Per Share
Six Months Ended June 30, 1996(1)......................... $ 1.05 $ 1.41
Cash Dividends Per Share
Year Ended December 31, 1995(1)........................... $ 2.10 $ 2.82
Earnings Per Share
Six Months Ended June 30, 1996............................ $ 0.75 $ 1.41(2)
Earnings Per Share
Year Ended December 31, 1995.............................. $ 2.20 $ 2.59(2)
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
MidAmerican Per Share of Common Stock Amounts
Book Value as of June 30, 1996............................... $12.33 $ 13.60
Book Value as of December 31, 1995........................... $12.17 $ 13.48
Cash Dividends Per Share
Six Months Ended June 30, 1996(1)......................... $ 0.60 $ 0.60
Cash Dividends Per Share
Year Ended December 31, 1995(1)........................... $ 1.18 $ 1.20
Earnings Per Share
Six Months Ended June 30, 1996............................ $ 0.79 $ 0.60(2)
Earnings Per Share
Year Ended December 31, 1995.............................. $ 1.22 $ 1.10(2)
</TABLE>
- ---------------
(1) The pro forma amounts reflect the current dividend rate for MidAmerican.
Actual dividends per share declared by MidAmerican and IES were $.54 per
MidAmerican share ($1.26 per IES Share) for the six months ended June 30,
1996, and $1.06 per MidAmerican share ($2.50 per IES Share) for the year
ended December 31, 1995, based on average shares outstanding for the period,
with effect given for the conversion ratio of 2.346 for each IES Share
(2) Pro forma amounts do not give effect to the synergies of the MidAmerican
Proposed Merger.
34
<PAGE> 40
ASSUMING NO HOLDERS OF IES COMMON STOCK ELECT TO RECEIVE CASH
The MidAmerican pro forma earnings and book value per share amounts are
computed by dividing the combined actual amounts by the pro forma shares
outstanding. The IES pro forma per share amounts are computed by multiplying the
MidAmerican pro forma per share amounts by the exchange ratio of 2.346.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
IES Per Share of Common Stock Amounts
Book Value as of June 30, 1996............................... $20.74 $ 33.08
Book Value as of December 31, 1995........................... $20.75 $ 32.84
Cash Dividends Per Share
Six Months Ended June 30, 1996(1)......................... $ 1.05 $ 1.41
Cash Dividends Per Share
Year Ended December 31, 1995(1)........................... $ 2.10 $ 2.82
Earnings Per Share
Six Months Ended June 30, 1996............................ $ 0.75 $ 1.29(2)
Earnings Per Share
Year Ended December 31, 1995.............................. $ 2.20 $ 2.37(2)
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
MidAmerican Per Share of Common Stock Amounts
Book Value as of June 30, 1996............................... $12.33 $ 14.10
Book Value as of December 31, 1995........................... $12.17 $ 14.00
Cash Dividends Per Share
Six Months Ended June 30, 1996(1)......................... $ 0.60 $ 0.60
Cash Dividends Per Share
Year Ended December 31, 1995(1)........................... $ 1.18 $ 1.20
Earnings Per Share
Six Months Ended June 30, 1996............................ $ 0.79 $ 0.55(2)
Earnings Per Share
Year Ended December 31, 1995.............................. $ 1.22 $ 1.01(2)
</TABLE>
- ---------------
(1) The pro forma amounts reflect the current dividend rate for MidAmerican.
Actual dividends per share declared by MidAmerican and IES were $0.54 per
MidAmerican share ($1.26 per IES Share) for the six months ended June 30,
1996, and $1.06 per MidAmerican share ($2.50 per IES Share) for the year
ended December 31, 1995, based on average shares outstanding for the
respective periods, with effect given to the conversion ratio of 2.346
shares of MidAmerican common stock for each IES Share.
(2) Pro forma amounts do not give effect to the synergies of the MidAmerican
Proposed Merger.
35
<PAGE> 41
PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of income of MidAmerican
and IES after giving effect to the MidAmerican Proposed Merger and are based on
the assumptions set forth in the notes thereto. The following pro forma
financial information has been prepared from, and should be read in conjunction
with, the historical consolidated financial statements and related notes thereto
of MidAmerican and IES, that are contained in their respective Annual Reports on
Form 10-K which are incorporated by reference herein. The information is not
necessarily indicative of the financial position or operating results that would
have occurred had the MidAmerican Proposed Merger been consummated on the date,
or the beginning of the periods, for which the MidAmerican Proposed Merger is
being given effect, nor is it necessarily indicative of future operating results
or financial position.
The pro forma amounts included in the summary set forth below assume
completion of the MidAmerican Proposed Merger, in which IES Shareholders in the
aggregate would receive up to 40% cash and the remainder in MidAmerican common
stock. IES Shareholders receiving cash would receive $39.00 per share and IES
Shareholders electing stock would receive 2.346 shares of MidAmerican common
stock for each IES Share. The pro forma amounts included in the summary set
forth below also assume payment by IES of aggregate termination fees in
connection with the termination of the Proposed Wisconsin Transaction in the
amount of $40,000,000. See "Background of the Solicitation -- The Wisconsin
Merger Agreement."
The unaudited pro forma consolidated balance sheet as of June 30, 1996,
gives effect to the MidAmerican Proposed Merger under the purchase method of
accounting as if the MidAmerican Proposed Merger had occurred at March 31, 1996.
The estimated decommissioning obligation recorded by IES of $70 million has been
reclassified from Accumulated Provision for Depreciation to Other Liabilities to
present the information on a basis consistent with the MidAmerican obligation.
Certain other amounts as reported by MidAmerican have been reclassified to
present the information on a basis consistent with the publicly available
information of IES.
The unaudited pro forma consolidated statements of income for the six
months ended June 30, 1996, and the year ended December 31, 1995, gives effect
to the MidAmerican Proposed Merger under the purchase method of accounting as if
the MidAmerican Proposed Merger had occurred at the beginning of each of the
respective periods and do not reflect any potential cost reduction or synergies
associated with the MidAmerican Proposed Merger. Certain amounts as reported by
MidAmerican have been reclassified to present the information on a basis
consistent with the publicly available information of IES.
36
<PAGE> 42
MIDAMERICAN ENERGY COMPANY
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1995
ASSUMING HOLDERS OF 40% OF IES COMMON STOCK ELECT TO RECEIVE CASH
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
IES PRO FORMA PRO FORMA
MIDAMERICAN (AS REPORTED) ADJUSTMENTS COMBINED
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues
Electric............................ $1,094,647 $ 560,471 $1,655,118
Gas................................. 459,588 190,339 649,927
Other............................... 169,409 100,200 269,609
---------- -------- -------- ----------
Total operating revenues.... 1,723,644 851,010 -- 2,574,654
Operating Expenses
Electric production fuel............ 169,218 96,256 265,474
Purchased power..................... 148,209 66,874 215,083
Cost of gas sold.................... 279,025 141,716 420,741
Other operation..................... 458,443 201,390 659,833
Maintenance......................... 86,184 46,093 132,277
Depreciation and amortization....... 182,093 97,958 11,958(5) 292,009
Taxes other than income taxes....... 99,340 49,011 148,351
---------- -------- -------- ----------
Total operating expenses.... 1,422,512 699,298 11,958 2,133,768
---------- -------- -------- ----------
Operating Income...................... 301,132 151,712 (11,958) 440,886
Other Income (deductions)
Allowance for funds used during
construction..................... 6,033 3,424 9,457
Other income and
deductions -- net................ 11,179 3,170 14,349
---------- -------- -------- ----------
Total other income
(deductions).............. 17,212 6,594 -- 23,806
Interest Expense...................... 119,954 50,727 30,463(6) 201,144
---------- -------- -------- ----------
Income from continuing operations
before income taxes and preferred
dividends........................ 198,390 107,579 (42,421) 263,548
Income Taxes.......................... 67,984 42,489 (12,490)(6) 97,983
Preferred Dividends of Subsidiary..... 914 914
---------- -------- -------- ----------
Net Income from Continuing
Operations.......................... 130,406 64,176 (29,931) 164,651
Preferred Dividends................... 8,059 -- 8,059
---------- -------- -------- ----------
Earnings Available to Common
Shareholders from Continuing
Operations.......................... $ 122,347 $ 64,176 $ (29,931) 156,592(8)
========== ======== ======== ==========
Average Common Shares Outstanding..... 100,401 29,202 (29,202)(7) 142,521
42,120(7)
Earnings per share of Common Stock
from Continuing Operations.......... $ 1.22 $ 2.20 $ 1.10(8)
========== ======== ==========
</TABLE>
37
<PAGE> 43
MIDAMERICAN ENERGY COMPANY
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1995
ASSUMING NO HOLDERS OF IES COMMON STOCK ELECT TO RECEIVE CASH
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
IES PRO FORMA PRO FORMA
MIDAMERICAN (AS REPORTED) ADJUSTMENTS COMBINED
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues
Electric............................... $1,094,647 $ 560,471 $1,655,118
Gas.................................... 459,588 190,339 649,927
Other.................................. 169,409 100,200 269,609
---------- -------- -------- ----------
Total operating revenues....... 1,723,644 851,010 -- 2,574,654
Operating Expenses
Electric production fuel............... 169,218 96,256 265,474
Purchased power........................ 148,209 66,874 215,083
Cost of gas sold....................... 279,025 141,716 420,741
Other operation........................ 458,443 201,390 659,833
Maintenance............................ 86,184 46,093 132,277
Depreciation and amortization.......... 182,093 97,958 11,958(5) 292,009
Taxes other than income taxes.......... 99,340 49,011 148,351
---------- -------- -------- ----------
Total operating expenses....... 1,422,512 699,298 11,958 2,133,768
Operating Income......................... 301,132 151,712 (11,958) 440,886
Other Income (deductions)
Allowance for funds used during
construction........................ 6,033 3,424 9,457
Other income and deductions -- net..... 11,179 3,170 14,349
---------- -------- -------- ----------
Total other income
(deductions)................. 17,212 6,594 -- 23,806
Interest Expense......................... 119,954 50,727 3,973(6) 174,654
---------- -------- -------- ----------
Income from continuing operations
before income taxes and preferred
dividends........................... 198,390 107,579 (15,931) 290,038
Income Taxes............................. 67,984 42,489 (1,629)(6) 108,844
Preferred Dividends of Subsidiary........ 914 914
---------- -------- -------- ----------
Net Income from Continuing Operations.... 130,406 64,176 (14,302) 180,280
Preferred Dividend....................... 8,059 -- 8,059
---------- -------- -------- ----------
Earnings Available to Common Shareholders
from Continuing Operations............. $ 122,347 $ 64,176 $ (14,302) $ 172,221(8)
========== ======== ======== ==========
Average Common Shares Outstanding........ 100,401 29,202 (29,202)(7) 170,600(7)
70,199(7)
Earnings per share of Common Stock from
Continuing Operations.................. $ 1.22 $ 2.20 $ 1.01(8)
========== ======== ==========
</TABLE>
38
<PAGE> 44
MIDAMERICAN ENERGY COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
ASSUMING HOLDERS OF 40% OF IES COMMON STOCK ELECT TO RECEIVE CASH
(IN THOUSANDS)
<TABLE>
<CAPTION>
IES PRO FORMA PRO FORMA
MIDAMERICAN (AS REPORTED) ADJUSTMENTS COMBINED
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
UTILITY PLANT
Electric................................ $3,781,563 $ 1,921,426 $5,702,989
Gas..................................... 693,564 167,760 861,324
Other................................... -- 109,088 109,088
----------- ------------- ----------- ----------
Total.............................. 4,475,127 2,198,274 -- 6,673,401
Accumulated provision for
depreciation.......................... 1,943,691 924,595 2,868,286
Construction work in progress........... 68,393 82,070 150,463
Nuclear fuel -- net..................... 31,676 40,532 72,208
----------- ------------- ----------- ----------
Net utility plant.................. 2,631,505 1,396,281 -- 4,027,786
POWER PURCHASE CONTRACT...................... 209,178 -- 209,178
INVESTMENTS AND OTHER PROPERTY, NET.......... 801,171 263,990 248,807(1) 1,313,968
GOODWILL..................................... -- -- 478,309(1) 478,309
CURRENT ASSETS
Cash and cash equivalents............... 24,763 14,520 (466,791)(1) 39,283
(70,000)(1)
536,791(2)
Accounts receivable -- net.............. 198,175 45,491 243,666
Fossil fuel inventories................. 52,290 12,821 65,111
Materials and supplies.................. 25,900 23,968 49,868
Prepayments and other................... 11,806 38,910 50,716
----------- ------------- ----------- ----------
Total current assets............... 312,934 135,710 448,644
DECOMMISSIONING TRUST FUND................... 68,001 52,084 120,085
DEFERRED CHARGES AND OTHER................... 409,911 238,242 44,596(3) 670,275
(22,474)(4)
----------- ------------- ----------- ----------
TOTAL ASSETS................................. $4,432,700 $ 2,086,307 $ 749,238 $7,268,245
========== ========== ========= =========
</TABLE>
39
<PAGE> 45
MIDAMERICAN ENERGY COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
ASSUMING HOLDERS OF 40% OF IES COMMON STOCK ELECT TO RECEIVE CASH
(IN THOUSANDS)
<TABLE>
<CAPTION>
IES PRO FORMA PRO FORMA
MIDAMERICAN (AS REPORTED) ADJUSTMENTS COMBINED
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
LIABILITIES AND EQUITY
CAPITALIZATION
Common Stock Equity:
Common Stock............................... $ 792,869 $ 399,928 $ 700,245(1) $1,493,114
(399,928)(1)
Other shareholders equity..................... 449,719 212,003 (212,003)(1) 449,719
----------- ------------- ----------- ----------
Total Common Stock Equity............. 1,242,588 611,931 88,314 1,942,833
Preferred stock not mandatorily redeemable.... 78,577 18,320 96,897
Preferred stock mandatory sinking fund........ 50,000 -- 50,000
Long-term debt -- net......................... 1,403,132 604,469 2,007,601
----------- ------------- ----------- ----------
Total capitalization.................. 2,774,297 1,234,720 88,314 4,097,331
CURRENT LIABILITIES
Current maturities, sinking funds, power
purchase and capital lease obligations..... 77,490 37,343 114,833
Short-term borrowings......................... 164,490 125,000 536,791(2) 826,281
Accounts payable.............................. 77,218 92,398 169,616
Taxes accrued................................. 76,462 47,698 124,160
Other accrued liabilities..................... 85,332 44,521 129,853
----------- ------------- ----------- ----------
Total current liabilities............. 480,992 346,960 536,791 1,364,743
OTHER LIABILITIES
Power purchase contract....................... 112,700 -- 112,700
Deferred income taxes......................... 750,388 258,310 102,011(1) 1,110,709
Deferred investment tax credits............... 92,141 35,793 127,934
Nuclear decommissioning obligations........... 68,001 72,000 140,001
Accrued environmental remediation costs....... 22,221 43,400 65,621
Capital lease obligations..................... 2,218 26,649 28,867
Other liabilities and deferred credits........ 129,742 68,475 44,596(3) 220,339
(22,474)(4)
----------- ------------- ----------- ----------
Total other liabilities............... 1,177,411 504,627 124,133 1,806,171
----------- ------------- ----------- ----------
TOTAL CAPITALIZATION AND
LIABILITIES......................... $4,432,700 $ 2,086,307 $ 749,238 $7,268,245
========== ========== ========= =========
</TABLE>
40
<PAGE> 46
MIDAMERICAN ENERGY COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
ASSUMING NO HOLDERS OF IES COMMON STOCK ELECT TO RECEIVE CASH
(IN THOUSANDS)
<TABLE>
<CAPTION>
IES PRO FORMA PRO FORMA
MIDAMERICAN (AS REPORTED) ADJUSTMENTS COMBINED
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
UTILITY PLANT
Electric................................. $3,781,563 $ 1,921,426 $5,702,989
Gas...................................... 693,564 167,760 861,324
Other.................................... -- 109,088 109,088
---------- ---------- ---------- ----------
Total............................ 4,475,127 2,198,274 -- 6,673,401
Accumulated provision for depreciation... 1,943,691 924,595 2,868,286
Construction work in progress............ 68,393 82,070 150,463
Nuclear fuel -- net...................... 31,676 40,532 72,208
---------- ---------- ---------- ----------
Net utility plant................ 2,631,505 1,396,281 -- 4,027,786
POWER PURCHASE CONTRACT.................... 209,178 -- 209,178
INVESTMENTS AND OTHER PROPERTY, NET........ 801,171 263,990 248,807(1) 1,313,968
GOODWILL................................... -- -- 478,331(1) 478,331
CURRENT ASSETS
Cash and cash equivalents................ 24,763 14,520 (70,000)(1) 39,283
70,000(2)
Accounts receivable -- net............... 198,175 45,491 243,666
Fossil fuel inventories.................. 52,290 12,821 65,111
Materials and supplies................... 25,900 23,968 49,868
Prepayments and other.................... 11,806 38,910 50,716
---------- ---------- ---------- ----------
Total current assets............. 312,934 135,710 -- 448,644
DECOMMISSIONING TRUST FUND................. 68,001 52,084 120,085
DEFERRED CHARGES AND OTHER................. 409,911 238,242 44,596(3) 670,275
(22,474)(4)
---------- ---------- ---------- ----------
TOTAL ASSETS..................... $4,432,700 $ 2,086,307 $ 749,260 $7,268,267
========== ========== ========== ==========
</TABLE>
41
<PAGE> 47
MIDAMERICAN ENERGY COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
ASSUMING NO HOLDERS OF IES COMMON STOCK ELECT TO RECEIVE CASH
(IN THOUSANDS)
<TABLE>
<CAPTION>
IES PRO FORMA PRO FORMA
MIDAMERICAN (AS REPORTED) ADJUSTMENTS COMBINED
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
LIABILITIES AND EQUITY
CAPITALIZATION
Common Stock Equity:
Common Stock.......................... $ 792,869 $ 399,928 $ 1,167,058(1) $1,959,927
(399,928)(1)
Other stockholders equity............. 449,719 212,003 (212,003)(1) 449,719
----------- ------------- ----------- ----------
Total Common Stock Equity........ 1,242,588 611,931 555,127 2,409,646
Preferred stock not mandatorily 78,577 18,320 96,897
redeemable............................
Preferred stock mandatory sinking fund... 50,000 -- 50,000
Long-term debt -- net.................... 1,403,132 604,469 2,007,601
----------- ------------- ----------- ----------
Total capitalization............. 2,774,297 1,234,720 555,127 4,564,144
CURRENT LIABILITIES
Current maturities, sinking funds, power 77,490 37,343 114,833
purchase and capital lease
obligations...........................
Short-term borrowings.................... 164,490 125,000 70,000(2) 359,490
Accounts payable......................... 77,218 92,398 169,616
Taxes accrued............................ 76,462 47,698 124,160
Other accrued liabilities................ 85,332 44,521 129,853
----------- ------------- ----------- ----------
Total current liabilities........ 480,992 346,960 70,000 897,952
OTHER LIABILITIES
Power purchase contract.................. 112,700 -- 112,700
Deferred income taxes.................... 750,388 258,310 102,011(1) 1,110,709
Deferred investment tax credits.......... 92,141 35,793 127,934
Nuclear decommissioning obligations...... 68,001 72,000 140,001
Accrued environmental remediation 22,221 43,400 65,621
costs.................................
Capital lease obligations................ 2,218 26,649 28,867
Other liabilities and deferred credits... 129,742 68,475 44,596(3) 220,339
(22,474)(4)
----------- ------------- ----------- ----------
Total other liabilities.......... 1,177,411 504,627 124,133 1,806,171
----------- ------------- ----------- ----------
TOTAL CAPITALIZATION AND
LIABILITIES.................... $4,432,700 $ 2,086,307 $ 749,260 $7,268,267
========== ========== ========= =========
</TABLE>
42
<PAGE> 48
MIDAMERICAN ENERGY COMPANY
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 1996
ASSUMING HOLDERS OF 40% OF IES COMMON STOCK ELECT TO RECEIVE CASH
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
IES PRO FORMA PRO FORMA
MIDAMERICAN (AS REPORTED) ADJUSTMENTS COMBINED
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues
Electric................................... $ 528,854 $ 262,400 $ 791,254
Gas........................................ 281,604 132,651 414,255
Other...................................... 194,321 58,793 253,114
----------- ------------- ----------- ----------
Total operating revenues........... 1,004,779 453,844 -- 1,458,623
Operating Expenses
Electric production fuel................... 85,962 43,021 128,983
Purchased power............................ 74,427 36,469 110,896
Cost of gas sold........................... 171,425 99,250 270,675
Other operation............................ 305,744 104,808 410,552
Maintenance................................ 44,160 25,920 70,080
Depreciation and amortization.............. 96,695 54,608 5,979(5) 157,282
Taxes other than income taxes.............. 50,968 26,004 76,972
----------- ------------- ----------- ----------
Total operating expenses........... 829,381 390,080 5,979 1,225,440
Operating Income............................. 175,398 63,764 (5,979) 233,183
Other Income (deductions)
Allowance for funds used during
construction............................ 2,480 1,380 3,860
Other income and deductions -- net......... 19,364 2,373 21,737
----------- ------------- ----------- ----------
Total other income (deductions).... 21,844 3,753 -- 25,597
Interest Expense............................. 59,322 25,839 15,232(6) 100,393
----------- ------------- ----------- ----------
Income from continuing operations before
income taxes and preferred dividends.... 137,920 41,678 (21,211) 158,387
Income Taxes................................. 54,131 19,070 (6,245)(6) 66,956
Preferred Dividends of Subsidiary............ 457 457
----------- ------------- ----------- ----------
Net Income from Continuing Operations........ 83,789 22,151 (14,966) 90,974
Preferred Dividends.......................... 4,661 4,661
----------- ------------- ----------- ----------
Earnings Available to Common Shareholders
from Continuing Operations................. $ 79,128 $ 22,151 $ (14,966) $ 86,313(8)
========== ========== ========= =========
Average Common Shares Outstanding............ 100,752 29,723 (29,723)(7) 142,872
42,120(7)
Earnings per share of Common Stock from
Continuing Operations...................... $ 0.79 $ 0.75 $ 0.60(8)
========== ========== =========
</TABLE>
43
<PAGE> 49
MIDAMERICAN ENERGY COMPANY
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
SIX MONTHS ENDED JUNE 30, 1996
ASSUMING NO HOLDERS OF IES' COMMON STOCK ELECT TO RECEIVE CASH
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
IES PRO FORMA PRO FORMA
MIDAMERICAN (AS REPORTED) ADJUSTMENTS COMBINED
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues
Electric............................... $ 528,854 $ 262,400 $ 791,254
Gas.................................... 281,604 132,651 414,255
Other.................................. 194,321 58,793 253,114
---------- -------- -------- ----------
Total operating revenues............ 1,004,779 453,844 1,458,623
Operating Expenses
Electric production fuel............... 85,962 43,021 128,983
Purchased power........................ 74,427 36,469 110,896
Cost of gas sold....................... 171,425 99,250 270,675
Other operation........................ 305,744 104,808 410,552
Maintenance............................ 44,160 25,920 70,080
Depreciation and amortization.......... 96,695 54,608 5,979(5) 157,282
Taxes other than income taxes.......... 50,968 26,004 76,972
---------- -------- -------- ----------
Total operating expenses............ 829,381 390,080 5,979 1,225,440
Operating Income......................... 175,398 63,764 (5,979) 233,183
Other Income (deductions)
Allowance for funds used during
construction........................ 2,480 1,380 3,860
Other income and deductions -- net..... 19,364 2,373 21,737
---------- -------- -------- ----------
Total other income (deductions)..... 21,844 3,753 25,597
Interest Expense......................... 59,322 25,839 1,987(6) 87,148
---------- -------- -------- ----------
Income from continuing operations
before income taxes and preferred
dividends........................... 137,920 41,678 (7,966) 171,632
Income Taxes............................. 54,131 19,070 (815)(6) 72,386
Preferred Dividends of Subsidiary........ 457 457
---------- -------- -------- ----------
Net Income from Continuing Operations.... 83,789 22,151 (7,151) 98,789
Preferred Dividends...................... 4,661 4,661
---------- -------- -------- ----------
Earnings Available to Common from
Continuing Operations.................. $ 79,128 $ 22,151 $ (7,151) $ 94,128(8)
========== ======== ======== ==========
Average Common Shares Outstanding........ 100,752 29,723 (29,723)(7) 170,951(7)
70,199(7)
---------- -------- ----------
Earnings per share of Common Stock from
Continuing Operations.................. $ 0.79 $ 0.75 $ 0.55(8)
========== ======== ==========
</TABLE>
44
<PAGE> 50
MIDAMERICAN ENERGY COMPANY
NOTES TO PRO FORMA COMBINED BALANCE SHEET AND STATEMENTS OF INCOME
(UNAUDITED, AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(1) Reflects the calculation of goodwill. Since detailed accounting records were
not available, the purchase price in excess of book value was first assigned
to certain investments in which the fair value was estimatable from publicly
available information and the remainder was applied to goodwill. The pro
forma adjustments assume that all liabilities of IES are stated at fair
value. Allocation of the purchase price will be reevaluated when completing
the transaction and could result in the amount of goodwill changing. See
Notes (3) and (4) for other fair value adjustments and Note (5) for
information regarding the amortization of goodwill.
The goodwill is based on an assumed exchange of cash and shares of
MidAmerican common stock for all of the outstanding IES Shares at the close
of business on July 10, 1996, the record date for the determination of IES
Shareholders entitled to vote at the Annual Meeting to be held on September
5, 1996. MidAmerican common stock was valued at $16 5/8 at the close of
business on August 2, 1996, the last trading day prior to the date the offer
was made. The pro forma adjustments are shown assuming holders of 40% of the
outstanding IES common stock will elect to receive cash at $39 per share and
assuming no IES Shareholders will elect to receive cash. The IES
Shareholders electing to receive shares of MidAmerican common stock will
receive 2.346 shares of MidAmerican common stock for each IES Share held.
Such excess is calculated as follows:
<TABLE>
<CAPTION>
ASSUMING 40% ASSUMING ZERO
ELECT CASH ELECT CASH
------------------- -------------------
<S> <C> <C> <C> <C>
IES Shares Outstanding............................... 29,923 29,923
Exchanged for Shares................................. 60% 17,954 100% 29,923
Shares of MidAmerican Issued for Each Share of IES
Exchanged for Shares............................ 2.346 2.346
Total MidAmerican Shares Issued...................... 42,120 70,199
Exchanged for Cash................................... 40% 11,969 0% --
MidAmerican Common Stock issued $16.625 per
share........................................... $ 700,245 $1,167,058
Cash............................................... 466,791 --
Transaction Costs.................................. 30,000 30,000
----------
$1,197,036 $1,197,058
Less: Net assets of IES at book value (as
reported).......................................... 611,931 611,931
Reduction to IES net assets for termination
fees*........................................... (40,000) (40,000)
Fair Value Adjustment for Certain Investments**.... 248,807 248,807
Deferred Tax Liability for Fair Value Adjustment... (102,011) (102,011)
----------
Goodwill**........................................... $ 478,309 $ 478,331
==========
</TABLE>
- ---------------
* The termination fees of $40 million were not included in the pro forma
income statement.
** Includes a $223,807,000 adjustment related to the increase in fair market
value in McLeod Common Stock. For purposes of this adjustment, the closing
price of McLeod as of June 30, 1996 was used. If the closing price from
August 16, 1996 was used, the valuation adjustment would have increased by
$35,774,000, and goodwill would have decreased by a like amount. Although
certain contractual and legal provisions restrict sales by MidAmerican of
its McLeod shares, the impact of such restrictions on the value of
MidAmerican's McLeod shares is not expected to have a material impact on
MidAmerican's pro forma income.
(2) Reflects the issuance of short-term notes payable to finance the exchange of
shares for cash, termination fees and transaction cost. The rate currently
available to MidAmerican on such borrowings is 5.675%. See Note (6) for
information regarding the effect of interest rate changes.
<TABLE>
<CAPTION>
ASSUMING 40% ASSUMING ZERO
ELECT CASH ELECT CASH
------------ -------------
<S> <C> <C>
Borrowings............................................... 536,791,000 $70,000,000
</TABLE>
45
<PAGE> 51
(3) Reflects the increase in the liability for the excess of the other
post-retirement employee benefit obligation in excess of plan assets. Also
reflects the corresponding increase in the regulatory asset as such costs
are recovered through the regulatory process when funded. The adjustment is
based on December 31, 1995, balances, the most current information available
to MidAmerican.
(4) Reflects the decrease in the pro forma pension liability for the excess of
the IES pension plan assets above the projected benefit obligation. Also
reflects the corresponding decrease in the regulatory asset since future
revenues should reflect lower funding levels. The adjustment is based on
December 31, 1995, balances, the most current information available to
MidAmerican.
(5) Reflects the amortization of goodwill over a 40 year period. This
amortization is not deductible for income tax purposes.
<TABLE>
<CAPTION>
ASSUMING 40% ASSUMING ZERO
ELECT CASH ELECT CASH
------------ -------------
<S> <C> <C>
Goodwill........................................ $478,309 478,331
Amortization Period............................. 40 40
Amortization Per Year........................... $ 11,958 $ 11,958
Amortization for Six-Month Period............... $ 5,979 $ 5,979
</TABLE>
The allocation of the excess of the purchase price over the book value of the
net assets received to assets other than goodwill may result in amortization
periods different than 40 years. If the average amortization period changed to
25 years, MidAmerican's annual pro forma results of operations would decrease as
follows:
<TABLE>
<S> <C> <C>
Earnings on Common Stock from Continuing
Operations.................................... $ (7,174) $ (7,175)
Earnings Per Common Share from Continuing
Operations.................................... $ (0.05) $ (0.04)
</TABLE>
(6) Reflects interest expense related to the issuance of short-term debt and the
related income tax benefit.
<TABLE>
<CAPTION>
ASSUMING 40% ASSUMING ZERO
ELECT CASH ELECT CASH
------------ -------------
<S> <C> <C>
Proceeds from issuance of short-term debt....... $536,791 $ 70,000
Interest Rate................................... 5.675% 5.675%
Interest Per Year............................... $ 30,463 $ 3,973
Interest for Six-Month Period................... $ 15,232 $ 1,987
Statutory Composite Federal and State Income Tax
Rate.......................................... 41% 41%
Income Tax Benefit Per Year..................... $ 12,490 $ 1,629
Income Tax Benefit for Six-Month Period......... $ 6,245 $ 815
</TABLE>
If the average borrowing rate increased 1/8%, MidAmericans's annual pro forma
results of operations would decrease as follows:
<TABLE>
<S> <C> <C>
Earnings on Common Stock from Continuing Operations................. $396 $ 52
Earnings Per Common Share from Continuing Operations................ $ -- $ --
</TABLE>
(7) Reflects the MidAmerican average common shares plus the MidAmerican common
stock issued in exchange for IES Shares.
(8) Pro forma amounts do not give effect to the synergies of the MidAmerican
Proposed Merger.
46
<PAGE> 52
MARKET PRICES AND DIVIDENDS
COMPARATIVE PER SHARE PRICES OF MIDAMERICAN AND IES COMMON STOCK
MidAmerican common stock ("MEC" in the table below) is traded on the New
York Stock Exchange, Inc. (the "NYSE"). Midwest Resources common stock ("MWR" in
the table below) and Iowa-Illinois common stock ("IWG" in the table below)
ceased to be publicly traded upon the consummation of their merger with and into
MidAmerican on July 1, 1995. IES common stock is traded on the NYSE, the Boston
Stock Exchange, Inc. (the "BSE"), the Chicago Stock Exchange (the "CSE"), the
Pacific Stock Exchange, Inc. (the "PSE") and the Philadelphia Stock Exchange
(the "PhSE"). The following table sets forth, for the periods indicated, the
high and low sales prices of MidAmerican, IES, Iowa-Illinois, and Midwest
Resources common stock as reported on the NYSE Consolidated Tape, in each case
based on published financial sources, and dividends declared. IES equivalent per
share data is also included, based on the exchange ratio for the MidAmerican
Proposed Merger of 2.346 shares of MidAmerican common stock per IES Share.
<TABLE>
<CAPTION>
DIVIDENDS DECLARED
--------------------------------------
MEC MWR IWG IES IES EQ.
----- ----- ------- ------ -------
<S> <C> <C> <C> <C> <C>
1994
First Quarter... $ -- $0.29 $0.4325 $0.525 $0.2238
Second
Quarter....... -- 0.29 0.4325 0.525 0.2238
Third Quarter... -- 0.29 0.4325 0.525 0.2238
Fourth
Quarter....... -- 0.29 0.4325 0.525 0.2238
1995
First Quarter... $ -- $0.29 $0.4325 $0.525 $0.2238
Second
Quarter....... -- 0.29 0.4325 0.525 0.2238
Third Quarter... 0.30 -- -- 0.525 0.2238
Fourth
Quarter....... 0.30 -- -- 0.525 0.2238
1996
First Quarter... $0.30 $ -- $ -- $0.525 $0.2238
Second
Quarter....... 0.30 -- -- 0.525 0.2238
Third Quarter
(through
August 16,
1996)......... 0.30 -- -- 0.525 0.2238
<CAPTION>
PRICE RANGE
------------------------------------------------------------------------------------------
MEC IWG MWR IES IES EQUIV.
---------------- ---------------- ---------------- ---------------- ------------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------- ------- ------- ------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994
First Quarter... $-- $-- $24 3/4 $22 3/8 $18 $16 $31 3/8 $27 $13.37 $11.51
Second
Quarter....... -- -- 24 1/2 19 7/8 16 3/4 13 7/8 29 25 1/2 12.36 10.87
Third Quarter... -- -- 22 1/2 19 1/4 15 3/8 13 1/2 28 3/8 24 7/8 12.10 10.60
Fourth
Quarter....... -- -- 20 5/8 18 7/8 14 1/2 12 7/8 26 5/8 24 3/4 11.35 10.55
1995
First Quarter... $-- $-- $22 1/8 $19 $14 5/8 $13 3/8 $27 5/8 $24 5/8 $11.78 $10.50
Second
Quarter....... -- -- 22 19 7/8 15 13 5/8 26 3/8 20 3/8 11.24 8.68
Third Quarter... 15 5/8 13 5/8 -- -- -- -- 26 3/4 21 3/8 11.40 9.11
Fourth
Quarter....... 17 1/8 15 -- -- -- -- 28 1/2 25 7/8 12.15 11.03
1996
First Quarter... $18 7/8 $16 1/4 $-- $-- $-- $-- $29 5/8 $26 1/2 $12.63 $11.30
Second
Quarter....... 17 7/8 16 1/4 -- -- -- -- 30 1/8 25 1/2 12.84 10.87
Third Quarter
(through
August 16,
1996)......... 17 5/8 15 3/4 -- -- -- -- 34 1/8 29 1/8 14.55 12.41
</TABLE>
On August 2, 1996, the last trading day before MidAmerican proposed the
MidAmerican Proposed Merger, the closing sale price per share of MidAmerican
common stock on the NYSE Consolidated Tape was $16 5/8. On August 16, 1996, the
last trading day prior to the date of this Proxy Statement, such price was
$16 1/8. Past price performance is not necessarily indicative of likely future
price performance. IES Shareholders are urged to obtain current market quotation
shares of MidAmerican common stock.
On August 2, 1996, the trading day before MidAmerican proposed the
MidAmerican Proposed Merger, the closing sale price per IES Share on the NYSE
Consolidated Tape was $29 3/4. On August 16, 1996, the last trading day prior to
the date of this Proxy Statement, such price was $33 7/8. Past price performance
is not necessarily indicative of likely future price performance. IES
Shareholders are urged to obtain current market quotations for IES Shares.
Holders of MidAmerican common stock are entitled to receive dividends from
funds legally available therefor when, as and if declared by the MidAmerican
Board. Although the MidAmerican Board presently intends to continue the policy
of paying quarterly cash dividends, future dividends of MidAmerican will depend
upon the earnings of MidAmerican and its subsidiaries, their financial condition
and other factors. The MidAmerican Board will continue to determine dividends by
considering the factors listed above and expects that dividends will continue to
be paid in amounts consistent with prior levels. As the factors used to
determine dividends necessarily involve a number of future contingencies to
which all companies are subject, there can be no certainty that dividends of the
combined entity will equal MidAmerican's current dividend rate per share.
47
<PAGE> 53
DESCRIPTION OF MIDAMERICAN CAPITAL STOCK
The following information relating to the capital stock of MidAmerican is
qualified in its entirety by reference to the Restated Articles of Incorporation
of MidAmerican, as amended (the "MidAmerican Articles") and the Restated Bylaws
of MidAmerican, as amended (the "MidAmerican Bylaws"), which are exhibits to the
Registration Statement and are incorporated herein by reference. See
"Incorporation of Certain Information by Reference."
The authorized capital stock of MidAmerican consists of 350,000,000 shares
of common stock, no par value, and 100,000,000 shares of Preferred Stock, no par
value (the "MidAmerican Preferred Stock"). The shares of MidAmerican Preferred
Stock are senior to MidAmerican common stock with respect to dividends and the
distribution of assets upon the dissolution, liquidation or winding up of
MidAmerican. The material terms of the MidAmerican common stock and the
MidAmerican Preferred Stock are summarized below. This summary is qualified in
its entirety by reference to the full text of the MidAmerican Articles and the
MidAmerican Bylaws.
The registrar and transfer agent for MidAmerican common stock and
MidAmerican Preferred Stock is MidAmerican.
MIDAMERICAN COMMON STOCK
Voting Rights. For all purposes, each registered holder of MidAmerican
common stock is, at each meeting of shareholders, entitled to one vote for each
share of MidAmerican common stock held, either in person or by proxy duly
authorized in writing. Except to the extent required by law or as permitted by
the MidAmerican Articles, as amended from time to time, the registered holders
of the shares of MidAmerican common stock have unlimited and exclusive voting
rights.
Dividends. The holders of MidAmerican common stock are entitled to receive
dividends as and when declared by MidAmerican's Board out of funds legally
available therefor, subject to the terms of any MidAmerican Preferred Stock
outstanding at the time. See "Description of Company Capital Stock --
MidAmerican Preferred Stock -- Dividends" below.
Liquidation Rights. In the event of a liquidation, dissolution or winding
up of the affairs of MidAmerican (a "Liquidation"), the holders of MidAmerican
common stock will be entitled to share ratably in any assets remaining after
payment in full of all liabilities of MidAmerican and the aggregate liquidation
preference of any MidAmerican Preferred Stock then outstanding.
No Other Rights. The holders of MidAmerican common stock will have no
preemptive rights to acquire or subscribe to any shares, or securities
convertible into shares, of MidAmerican common stock. MidAmerican common stock
contains no redemption provisions or conversion rights. The holders of
MidAmerican common stock do not have the right to cumulate their votes in the
election of directors.
MIDAMERICAN PREFERRED STOCK
General. The MidAmerican Board is authorized to approve the issuance of
one or more classes or series of MidAmerican Preferred Stock without further
authorization of its shareholders and to determine the number of shares,
designations, preferences, limitations and relative rights of such classes or
series, including provision for special, conditional, limited or no voting
rights. Thus, any series of MidAmerican Preferred Stock may, if so determined by
the MidAmerican Board, have full voting rights with holders of MidAmerican
common stock or limited or no voting rights (except as may be required by law),
be convertible into or exchangeable for MidAmerican common stock or another
security, and have such other powers, preferences and relative, participating,
optional and other special rights, and such qualifications, limitations and
restrictions thereon, as the MidAmerican Board shall determine. Further, the
ability of the MidAmerican Board to issue classes and series of MidAmerican
Preferred Stock may have the effect of delaying, deferring or preventing a
future takeover or change in control of MidAmerican, and could prevent
shareholders from tendering their shares in transactions which they might favor
by decreasing the likelihood that such offers would be made in the first
instance. The MidAmerican Articles authorize several series as described below.
48
<PAGE> 54
Designated Series. In connection with the formation of MidAmerican there
were designated ten series of MidAmerican Preferred Stock aggregating 2,748,690
shares as follows:
<TABLE>
<CAPTION>
SERIES NUMBER OF SHARES
------------------------------------------------------------- ----------------
<S> <C>
$3.30 Series................................................. 49,523
$3.75 Series................................................. 38,320
$3.90 Series................................................. 32,630
$4.20 Series................................................. 47,369
$4.35 Series................................................. 49,950
$4.40 Series................................................. 50,000
$4.80 Series................................................. 49,898
$5.25 Series................................................. 100,000
$7.80 Series................................................. 400,000
$1.7375 Series............................................... 1,931,000
</TABLE>
Dividends. The holders of shares of MidAmerican Preferred Stock are
entitled to receive, when as, and if declared payable by the MidAmerican Board
from funds legally available for the payment thereof, dividends in the amount
per annum fixed by resolution of the MidAmerican Board creating such particular
class or series. The respective annual dividend rates per share set for each
series of MidAmerican Preferred Stock are as follows:
<TABLE>
<CAPTION>
SERIES ANNUAL DIVIDEND RATE
---------------------------------------------------------- --------------------
<S> <C>
$3.30 Series.............................................. $ 3.30
$3.75 Series.............................................. $ 3.75
$3.90 Series.............................................. $ 3.90
$4.20 Series.............................................. $ 4.20
$4.35 Series.............................................. $ 4.35
$4.40 Series.............................................. $ 4.40
$4.80 Series.............................................. $ 4.80
$5.25 Series.............................................. $ 5.25
$7.80 Series.............................................. $ 7.80
$1.7375 Series............................................ $ 1.7375
</TABLE>
The regular quarterly dividend payment dates on shares of MidAmerican
Preferred Stock are the first day of March, June, September and December.
So long as any shares of MidAmerican Preferred Stock are outstanding,
MidAmerican may not (i) pay or declare any dividend or other distribution on any
shares of MidAmerican common stock or any other shares of MidAmerican ranking
junior to MidAmerican Preferred Stock, or (ii) purchase, redeem or otherwise
acquire for value any shares of MidAmerican common stock or other shares of
MidAmerican ranking junior to MidAmerican Preferred Stock, unless and until all
dividends in arrears on all MidAmerican Preferred Stock are paid in full;
provided that a dividend or distribution may be declared and paid on shares of
MidAmerican common stock or such junior shares or such shares may be acquired by
MidAmerican, notwithstanding the foregoing if (a) such dividend or distribution
is payable solely in shares of MidAmerican Common Stock or in such junior shares
or (b) such acquisition is in exchange for, or through the application of the
proceeds of the sale of, shares of MidAmerican Common Stock or such junior
shares.
No dividend may be paid on or declared with respect to any shares of
MidAmerican Preferred Stock on which dividends are payable on a particular date,
in whole or in part, unless at the same time a like proportionate dividend for
the same dividend payment period or portion thereof is likewise paid or
declared, as the case may be, for shares of MidAmerican Preferred Stock for
which dividends are payable on the same date.
Liquidation Preferences. Upon a Liquidation, the holders of outstanding
shares of each series of MidAmerican Preferred Stock will be entitled to receive
out of the assets of MidAmerican an amount per
49
<PAGE> 55
share set forth in the articles of amendment to the MidAmerican Articles in
which the terms of such series are set forth. In the event of a voluntary
Liquidation of MidAmerican, (i) the holders of shares of the $1.7375 Series,
$3.30 Series, $3.75 Series, $4.35 Series, $4.40 Series, $4.80 Series, $5.25
Series and $7.80 Series of MidAmerican Preferred Stock will be entitled to
receive out of the assets of MidAmerican the amount which would then be payable
upon such share in the event of the redemption thereof, plus accrued and unpaid
dividends to the date fixed for payment and no more (See "Description of
MidAmerican Capital Stock -- MidAmerican Preferred Stock -- Optional
Redemption"), except that prior to November 1, 1998, the holders of the shares
of the $5.25 Series will be entitled to receive $105.25 per share and prior to
May 1, 2001, the holders of the shares of the $7.80 Series shall be entitled to
receive $107.80 per share, and no more, and (ii) the holders of shares of the
$3.90 Series and $4.20 Series will be entitled to receive out of the assets of
MidAmerican the amount of $100 per share, plus accrued and unpaid dividends to
the date of payment of such amount, and no more. In the event of an involuntary
Liquidation of MidAmerican (a) holders of shares of the $3.30 Series, $3.75
Series, $3.90 Series, $4.20 Series, $4.35 Series, $4.40 Series, $4.80 Series,
$5.25 Series and $7.80 Series of MidAmerican Preferred Stock will be entitled to
receive out of the assets of MidAmerican, $100 per share, and (b) the holders of
the $1.7375 Series of MidAmerican Preferred Stock will be entitled to receive
$25 per share, in each case plus accrued and unpaid dividends to the date of
payment of such amount, and no more.
Until payment to the holders of MidAmerican Preferred Stock as aforesaid,
or until moneys or other assets sufficient for such payment have been set apart
for payment, no payment or distribution will be made to holders of MidAmerican
Common Stock or any other junior shares which rank below MidAmerican Preferred
Stock with respect to the payment of dividends or assets in connection with or
upon such Liquidation. Neither a consolidation nor a merger of MidAmerican with
or into any other corporation, nor a merger of any other corporation into
MidAmerican, nor a purchase, redemption or other acquisition by MidAmerican of
less than all of its shares of any class at the time outstanding, nor the sale
or transfer of substantially all its assets as an entirety, will constitute a
Liquidation for purposes of the foregoing provisions.
Optional Redemption. Upon not more than 60 nor less than 30 days' prior
notice, the outstanding shares of MidAmerican Preferred Stock may be redeemed by
MidAmerican, at its option, by action of the MidAmerican Board, as a whole at
any time or in part from time to time, by paying in cash on a redemption date
specified by the MidAmerican Board, the following redemption prices, in each
case plus an amount equal to accrued and unpaid dividends thereon to such
redemption date:
<TABLE>
<CAPTION>
SERIES AMOUNTS FIXED FOR REDEMPTION
------------------------------------------- ----------------------------------
<S> <C>
$3.30 Series............................... $101.50 per share
$3.75 Series............................... $102.75 per share
$3.90 Series............................... $105.00 per share
$4.20 Series............................... $103.439 per share
$4.35 Series............................... $102.00 per share
$4.40 Series............................... $101.50 per share
$4.80 Series............................... $102.70 per share
$5.25 Series............................... $101.97 per share on
November 1, 1998 through
October 31, 1999;
$101.31 per share on
November 1, 1999 through
October 31, 2000;
$100.66 per share on
November 1, 2000 through
October 31, 2001; and
$100.00 per share on or after
November 1, 2001.
</TABLE>
50
<PAGE> 56
<TABLE>
<CAPTION>
SERIES AMOUNTS FIXED FOR REDEMPTION
------------------------------------------- ----------------------------------
<S> <C>
$7.80 Series............................... $107.80 per share through April
30, 2001;
$103.90 per share on May 1, 2001
through April 30, 2002; and
$101.95 per share on or after
May 1, 2002.
$1.7375 Series............................. $26.0425 per share through
November 30, 1996;
$25.6950 per share on
December 1, 1996 through
November 30, 1997;
$25.3475 per share on
December 1, 1997 through
November 30, 1998; and
$25.0000 per share on or after
December 1, 1998.
</TABLE>
However, (i) prior to December 1, 1998, no shares of the $1.7375 Series of
MidAmerican Preferred Stock may be redeemed through a refunding, directly or
indirectly, by or in anticipation of the incurring of any debt which has an
interest cost, or the issuance of stock ranking equally with or prior to the
$1.7375 Series of MidAmerican Preferred Stock as to dividends or assets, which
has a dividend cost to MidAmerican (computed in accordance with generally
accepted financial practice), of less than 7.15% per annum, and (ii) prior to
November 1, 1998, no shares of the $5.25 Series may be redeemed at the option of
MidAmerican.
Subject to the limitations set forth under "-- Repurchases; Limitations on
Reacquisitions" below, MidAmerican will on November 1, 2003 redeem all shares of
the $5.25 Series of MidAmerican Preferred Stock then outstanding at $100 per
share, plus accrued and unpaid dividends thereon through October 31, 2003.
If less than all of the shares of MidAmerican Preferred Stock are to be
redeemed, their redemption will be determined by lot. Notice of redemption
having been mailed and funds necessary for such redemption having been deposited
as provided in the Articles of Amendment, all shares to be redeemed will be
deemed no longer outstanding, and all voting and other rights with respect
thereto will thereupon cease except for the right to receive, out of funds so
deposited, without interest, the redemption funds.
Sinking Funds. Subject to the limitations set forth under "-- Repurchase;
Limitations on Reacquisitions" below, while any shares of the $7.80 Series of
MidAmerican Preferred Stock are outstanding, MidAmerican must set aside and make
sinking fund payments in the amount of $6,660,000 (or, if less, such amount as
would be sufficient to redeem all of the then outstanding shares of the $7.80
Series), plus accrued and unpaid dividends on all shares to be redeemed, on or
before May 1, 2001 and on or before May 1 of each year thereafter through May 1,
2005. Such obligation will be cumulative. Shares of the $7.80 Series of
MidAmerican Preferred Stock redeemed, purchased or otherwise acquired by
MidAmerican other than through sinking fund payments (whether mandatory or
optional) may be credited against such obligation. MidAmerican may make optional
sinking fund payments of up to $6,660,000, plus accrued and unpaid dividends on
the shares to be redeemed, in respect to each sinking fund payment date. Such
option is not cumulative and does not relieve MidAmerican of its obligations to
make future mandatory sinking fund payments. All amounts set aside on a
particular date, whether mandatorily or at MidAmerican's option, are applied on
the first sinking fund payment date that occurs on or after such date, in the
manner indicated above under "-- Optional Redemption." There are no sinking
funds for the purchase or redemption of any other Series of MidAmerican
Preferred Stock.
Conversion Rights. None of the shares of MidAmerican Preferred Stock have
any conversion rights.
Repurchases; Limitations on Reacquisitions. Subject to applicable law and
the provisions of the MidAmerican Articles, MidAmerican may acquire the shares
of any Series of MidAmerican Preferred Stock at a price per share not exceeding
the amount at the time payable in the event of their redemption otherwise than
through the operation of the applicable sinking fund, if any.
51
<PAGE> 57
If MidAmerican is in default in the payment of any quarterly dividend or in
setting aside or making any sinking fund payments on shares of MidAmerican
Preferred Stock, it may not (other than by use of unapplied sinking fund amounts
set aside prior to such default):
(a) redeem any shares of MidAmerican Preferred Stock unless all shares
are redeemed; or
(b) purchase or otherwise acquire for a valuable consideration any
shares, except pursuant to offers of sale made by the holders in response
to an invitation for tenders given by mail by MidAmerican simultaneously to
the holders of record of all outstanding shares of MidAmerican Preferred
Stock.
Voting Rights. The holders of MidAmerican Preferred Stock are not be
entitled to vote on any matter submitted to a vote of the shareholders of
MidAmerican except to the extent required by law or as permitted by the
MidAmerican Articles, as described herein. Whenever dividends payable on any
shares of MidAmerican Preferred Stock are in default in an aggregate amount
equivalent to six full quarterly dividends, and until all such dividends then in
default shall have been paid or declared and set apart for payment, the holders
of shares of such stock, of all series, voting together as a single class, will
be entitled to elect two directors to the MidAmerican Board.
No Preemptive Rights. No holder of shares of MidAmerican Preferred Stock
as such has any preemptive or preferential right to purchase or subscribe for
any shares of stock or rights or options to purchase stock or any other
securities of MidAmerican of any kind whatsoever, whether now or hereafter
authorized.
CERTAIN BUSINESS COMBINATIONS
The MidAmerican Articles require the affirmative vote of the holders of at
least 75%, excluding shares beneficially owned by a 25% Shareholder (as defined
therein), of the outstanding shares of Voting Stock (as defined therein), to
approve any merger or other Business Combination (as defined therein), which
term includes a merger of MidAmerican, sale of assets having a Fair Market Value
(as defined therein) of $25 million or more of MidAmerican or any subsidiary,
the adoption of a plan of liquidation of MidAmerican, the issuance or transfer
of securities of MidAmerican to a 25% Shareholder or an Affiliate (as defined
therein) or Associate (as defined therein) thereof, the reclassification of
securities of MidAmerican and similar extraordinary corporate transactions
between, or otherwise involving, MidAmerican and any 25% Shareholder or
Affiliate or Associate thereof, unless (i) the transaction has been approved by
a majority of the Continuing Directors (as defined therein), or (ii) certain
fair price, form of consideration and procedural requirements are satisfied by
the 25% Shareholder, in addition to the satisfaction of certain conditions
relating to directors, dividends, loans, corporate structure and the acquisition
by the 25% Shareholder of additional shares. In addition to Business
Combinations, MidAmerican Articles require the affirmative vote of the holders
of at least 75% of the outstanding shares of Voting Stock, excluding shares
beneficially owned by an Interested Securityholder (as defined therein), for
MidAmerican to make any purchase or other acquisition of any equity security (as
defined in Rule 3a-11(1) under the Exchange Act) from any Interested
Securityholder who has beneficially owned such securities for less than two
years prior to the date of such purchase or other acquisition, or any agreement
in respect thereof. These provisions may have the effect of delaying, deferring
or preventing a future takeover or change in control of MidAmerican, and could
prevent shareholders from tendering their shares in transactions which they
might favor by decreasing the likelihood that such offers would be made in the
first instance.
52
<PAGE> 58
COMPARISON OF CORPORATE CHARTERS AND RIGHTS OF SECURITY HOLDERS
The following information relating to the rights of MidAmerican
Shareholders and IES Shareholders is qualified in its entirety by reference to
the MidAmerican Articles and the MidAmerican Bylaws, which are exhibits to the
Registration Statement and are incorporated herein by reference. See
"Incorporation of Certain Information by Reference."
If the MidAmerican Proposed Merger is consummated, holders of IES Common
Stock, an Iowa corporation, will become holders of common stock of MidAmerican,
also an Iowa corporation, and their rights will continue to be governed by the
Iowa Act, the MidAmerican Articles and the MidAmerican Bylaws. The material
differences between the rights of MidAmerican shareholders and IES Shareholders
are set forth below. This summary is qualified in its entirety by reference to
the full text of such documents.
Voting Power. If the MidAmerican Proposed Merger is approved, IES
Shareholders will hold between approximately 29% and 41% of the aggregate number
of shares of MidAmerican common stock outstanding at the Effective Time,
depending on the number of IES Shares exchanged for cash. Following the
MidAmerican Proposed Merger, IES Shareholders will therefore not possess the
same voting power on matters put to a vote of the shareholders of MidAmerican as
possessed prior to the MidAmerican Proposed Merger.
Capitalization. The MidAmerican Articles authorize the issuance of up to
350,000,000 shares of MidAmerican common stock and 100,000,000 shares of
MidAmerican Preferred Stock which may be issued without the approval of the
holders of MidAmerican common stock. The IES Articles authorize the issuance of
up to 48,000,000 shares of IES Common Stock and 5,000,000 shares of preferred
stock, no par value, which may be issued without the approval of the holders of
IES Common Stock.
Board of Directors. The IES Articles provide for the IES Board to consist
of not less than five members, as determined from time to time by its Bylaws
(the "IES Bylaws"). The MidAmerican Articles provide for its Board of Directors
to consist of not less than ten nor more than 22 directors as determined from
time to time in accordance with MidAmerican Bylaws. Neither the IES Articles nor
MidAmerican Articles provide for a classified Board of Directors.
Certain Business Combinations. The IES Articles require the affirmative
vote of the holders of at least 80% of the outstanding shares of Voting Stock
(as defined therein), to approve any merger or other Business Combination (as
defined therein), which term includes a merger of the corporation, sale of
assets to or with any 5% Shareholder or any Affiliate of any 5% Shareholder of a
major part of the assets of IES or any Subsidiary (as defined therein), the
adoption of a plan of liquidation of the corporation by or on behalf of any 5%
Shareholders or any Affiliate of any 5% Shareholders, the issuance or transfer
of securities of the corporation to a 5% Shareholder or an Affiliate (as defined
therein) thereof, the reclassification of securities of the corporation and
similar extraordinary corporate transactions between, or otherwise involving,
IES and any 5% Shareholder or Affiliate thereof, unless (i) the transaction has
been approved by 80% of the Unaffiliated Directors (as defined therein), or (ii)
certain fair price, form of consideration and procedural requirements are
satisfied by the 5% Shareholder, in addition to the satisfaction of certain
conditions relating to directors, dividends, loans, corporate structure and the
acquisition by the 5% Shareholder of additional shares. The MidAmerican Articles
also contain provisions regarding certain business combinations. See
"Description of MidAmerican Capital Stock -- Certain Business Combinations".
Special Meetings. MidAmerican Articles provide that special meetings of
the shareholders of MidAmerican may be called at any time by the Chairman of the
Board of Directors or by the President on at least ten days notice. The IES
Articles contain no such provision. In general, the IBCA currently grants to
shareholders of the Company the right to call a special meeting of shareholders
by the written demand of holders of 10% or more of all of the votes entitled to
be cast on any issue proposed to be considered at the proposed special meeting.
Purchases From Interested Shareholders. The MidAmerican Articles restrict
the ability of MidAmerican to purchase stock from an Interested Shareholder. See
"Description of MidAmerican Capital Stock -- Certain Business Combinations". The
IES Articles do not contain such a provision.
53
<PAGE> 59
AVAILABLE INFORMATION
Each of MidAmerican and IES is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
accordingly files reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information filed with the SEC are
available for inspection and copying at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's Regional Offices located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
documents may also be obtained from the Public Reference Room of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the MidAmerican common stock and the IES Common Stock are
listed on the NYSE, and reports, proxy statements and other information filed by
MidAmerican and IES with the NYSE may be inspected at the offices of the NYSE,
20 Broad Street, 7th Floor, New York, New York 10005. IES Common Stock also is
listed on the BSE, the CSE, the PSE, and the PhSE, and reports, proxy statements
and other information filed by IES with such exchanges may be inspected at the
offices of the BSE, One Boston Place, Boston, Massachusetts 02108, the CSE, 440
South LaSalle Street, Chicago, Illinois 60605, the PSE, 301 Pine Street, San
Francisco, California 94104, and the PhSE, 1900 Market Street, Philadelphia,
Pennsylvania 19103.
In addition, the SEC maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the SEC. The address of such Web site is http://www.sec.gov.
MidAmerican has filed with the SEC under the Securities Act a Registration
Statement (the "Registration Statement") with respect to the shares of
MidAmerican common stock that could be issuable in a business combination
between MidAmerican and IES. This Proxy Statement does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. The
Registration Statement, including any amendments, schedules and exhibits
thereto, is available for inspection and copying as set forth above.
THE INFORMATION CONCERNING IES AND THE PROPOSED WISCONSIN TRANSACTION
CONTAINED IN THIS PROXY STATEMENT HAS BEEN TAKEN FROM OR IS BASED UPON DOCUMENTS
AND RECORDS ON FILE WITH THE SEC AND OTHER PUBLICLY AVAILABLE INFORMATION.
MIDAMERICAN HAS NO KNOWLEDGE THAT WOULD INDICATE THAT STATEMENTS RELATING TO IES
CONTAINED IN THIS PROXY STATEMENT IN RELIANCE UPON PUBLICLY AVAILABLE
INFORMATION ARE INACCURATE OR INCOMPLETE. MIDAMERICAN, HOWEVER, HAS NOT BEEN
GIVEN ACCESS TO THE BOOKS AND RECORDS OF IES, WAS NOT INVOLVED IN THE
PREPARATION OF SUCH INFORMATION AND STATEMENTS, AND IS NOT IN A POSITION TO
VERIFY, OR MAKE ANY REPRESENTATION WITH RESPECT TO THE ACCURACY OF, ANY SUCH
INFORMATION OR STATEMENTS.
54
<PAGE> 60
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement incorporates documents by reference which are not
presented herein or delivered herewith. These documents are available upon
request from, in the case of documents relating to MidAmerican, Paul J.
Leighton, Vice President and Corporate Secretary, MidAmerican Energy Company,
666 Grand Avenue, P.O. Box 657, Des Moines, Iowa 50303-0657 (telephone:
515-242-4300), and in the case of documents relating to IES, directed to Stephen
W. Southwick, Vice President, General Counsel & Secretary, IES Industries Inc.,
IES Tower, 200 First Street S.E., Cedar Rapids, Iowa 52401 (telephone:
319-398-4411). To ensure timely delivery of MidAmerican documents and IES
documents prior to the Annual Meeting, a request to MidAmerican or IES should be
made by August 28, 1996.
MidAmerican hereby undertakes to provide without charge to each person,
including any beneficial owner to whom a copy of this Proxy Statement has been
delivered, upon the written or oral request of such person, a copy (without
exhibits, except those specifically incorporated by reference) of any and all of
the MidAmerican documents referred to below which have been or may be
incorporated in this Proxy Statement by reference. Requests for such documents
should directed to Paul J. Leighton at the address indicated above.
The following documents, previously filed with the SEC pursuant to the
Exchange Act, are hereby incorporated by reference:
1. MidAmerican's Annual Report on Form 10-K for the year ended
December 31, 1995.
2. MidAmerican's Quarterly Reports on Form 10-Q for the
quarters ended March 31 and June 30, 1996.
3. MidAmerican's Current Reports on Form 8-K dated February
20, April 30 and May 29, 1996.
4. MidAmerican's Proxy Statement dated March 18, 1996 for the
1996 Annual Meeting of Shareholders held on April 24, 1996.
5. IES' Annual Report on Form 10-K for the year ended December
31, 1995, as amended by IES' Amendment on Form 10-K/A filed
on April 29, 1996.
6. IES' Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1996.
7. IES' Current Reports on Form 8-K dated February 20, April
8, April 18 and May 24, 1996.
8. IES' Proxy Statement dated July 11, 1996, for the 1996
Annual Meeting of Shareholders to be held on September 5,
1996.
The information relating to IES and MidAmerican contained in this Proxy
Statement should be read together with the information in the documents
incorporated by reference herein.
All documents filed by IES and MidAmerican pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
date of the Meeting on September 5, 1996, and any postponements or adjournments
thereof, shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such documents. All proxy soliciting materials
filed from time to time after the date hereof as an exhibit to the Registration
Statement shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such materials.
ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED
FOR PURPOSES OF THIS PROXY STATEMENT TO THE EXTENT THAT A STATEMENT CONTAINED
HEREIN OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT WHICH ALSO IS OR IS DEEMED TO
BE INCORPORATED BY REFERENCE HEREIN MODIFIES OR SUPERSEDES SUCH STATEMENT. ANY
SUCH STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED, EXCEPT AS SO
MODIFIED OR SUPERSEDED, TO CONSTITUTE A PART OF THIS PROXY STATEMENT.
55
<PAGE> 61
YOUR PROXY AND PROMPT ACTION ARE IMPORTANT. YOU ARE URGED TO GRANT YOUR
PROXY BY SIGNING, DATING AND MAILING PROMPTLY THE ENCLOSED BLUE PROXY CARD.
PLEASE ACT TODAY.
MIDAMERICAN ENERGY COMPANY
August 19, 1996
If you have any questions or need assistance in voting your shares, please
call D. F. King or MidAmerican at the telephone numbers listed below:
D.F. KING & CO., INC.
BANKS AND BROKERS CALL (212) 269-5550
MIDAMERICAN ENERGY COMPANY
CALL TOLL-FREE: 1-888-776-4692
56
<PAGE> 62
ANNEX A
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF MIDAMERICAN AND OTHER REPRESENTATIVES OF
MIDAMERICAN WHO MAY SOLICIT PROXIES
The following tables set forth the name, business address and the present
principal occupation or employment, and the name, principal business and address
of any corporation or other organization in which such employment is carried on,
of the directors and executive officers of MidAmerican and other representatives
of MidAmerican who may solicit proxies from IES Shareholders.
DIRECTORS AND EXECUTIVE OFFICERS OF MIDAMERICAN
<TABLE>
<CAPTION>
PRESENT POSITION WITH MIDAMERICAN OR OTHER
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
John W. Aalfs...................... Director, MidAmerican, President,
Aalfs Manufacturing, Inc. Aalfs Manufacturing, Inc.
1005 Fourth Street
P.O. Box 3567
Sioux City, IA 51104.
Stanley J. Bright.................. Director, President and CEO, MidAmerican
MidAmerican Energy Company
666 Grand Avenue
P.O. Box 657
Des Moines, IA 50303-0657
Robert A. Burnett.................. Director, MidAmerican, Retired Chairman and CEO,
Meredith Corporation Meredith Corporation
1716 Locust Street
Des Moines, IA 50309-3023
Dr. Ross D. Christensen............ Director, MidAmerican,
847 W. 4th Street Orthodontist in Private Practice
Waterloo, IA 50701
Russell E. Christiansen............ Director and Chairman of the Board, MidAmerican
MidAmerican Energy Company
600 Stevens Port Drive
Suite 100
Dakota Dunes, SD 57049
John W. Colloton................... Director, MidAmerican, Vice President
200 Hawkins Dr. for Statewide Health Services
8820-JPP
Iowa City, IA 52242-1009
Frank S. Cottrell.................. Director, MidAmerican, Vice President and
Deere & Company General Counsel, Deere & Company
John Deere Road
Moline, IL 61265
Jack W. Eugster.................... Director, MidAmerican, Chairman, President
Musicland Group, Inc. and CEO, The Musicland Group, Inc.
10400 Yellow Circle Dr.
Minnetonka, MN 55343
</TABLE>
A-1
<PAGE> 63
<TABLE>
<CAPTION>
PRESENT POSITION WITH MIDAMERICAN OR OTHER
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
Mel Foster, Jr..................... Director, MidAmerican, Chairman, Mel
Mel Foster Co., Inc. Foster Co., Inc.
3211 East 35 St. Court
Davenport, IA 52807
Nolden Gentry...................... Director, MidAmerican, Attorney in
Brick, Gentry, Bowers, Swartz, Private Practice
Stoltze, Schuling & Levis, P.C.
550 39th Street
Des Moines, IA 50312
James M. Hoak, Jr.................. Director, MidAmerican, Chairman,
Heritage Media Corp. Heritage Media Corp.
One Galleria Tower
1355 Noel Road
Suite 1500
Dallas, TX 75240
Richard L. Lawson.................. Director, MidAmerican, President and CEO,
National Mining Association National Mining Association
1130 Seventeenth Street, N.W.
Washington, D.C. 20036-4677
Robert L. Peterson................. Director, MidAmerican, Chairman, President
IBP, inc. and CEO, IBP, inc.
IBP Avenue
P.O. Box 515
Dakota City, NE 68731
Nancy L. Seifert................... Director, MidAmerican, Executive Vice President,
James F. Siefert & Sons, L.L.C. James Siefert & Sons, L.L.C.
300 Law Building
225 2nd St., SE
Cedar Rapids, IA 52401-1400
W. Scott Tinsman................... Director, MidAmerican, Co-Founder and
Twin-State Engineering & Vice President, Twin-State Engineering
Chemical Company & Chemical Company
3541 E. Kimberly Road
Davenport, IA 52808
Leonard L. Woodruff................ Director, MidAmerican, President, Woodruff
Woodruff Construction Construction Company
P.O. Box 1830
RR3
Highway 169 and 7
Fort Dodge, IA 50501
Lynn K. Vorbrich................... President, Electric Division, MidAmerican
MidAmerican Energy Company
206 East Second St.
P.O. Box 4350
Davenport, IA 52808
</TABLE>
A-2
<PAGE> 64
<TABLE>
<CAPTION>
PRESENT POSITION WITH MIDAMERICAN OR OTHER
NAME AND BUSINESS ADDRESS PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
Beverly A. Wharton................. President, Gas Division, MidAmerican
MidAmerican Energy Company
401 Douglas St.
Sioux City, IA 51102
Philip G. Lindner.................. Group Vice President and Chief Financial
MidAmerican Energy Company Officer, MidAmerican
666 Grand Avenue
P.O. Box 657
Des Moines, IA 50303-0657
John A. Rasmussen, Jr.............. Group Vice President and General Counsel,
MidAmerican Energy Company MidAmerican
666 Grand Avenue
P.O. Box 657
Des Moines, IA 50303-0657
Ronald W. Stepien.................. Group Vice President, MidAmerican
MidAmerican Energy Company
666 Grand Avenue
P.O. Box 657
Des Moines, IA 50303-0657
</TABLE>
OTHER REPRESENTATIVES OF MIDAMERICAN WHO MAY SOLICIT PROXIES
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
Paul J. Leighton.......... Vice President and Corporate
Secretary
David J. Levy............. Vice President and Chief
Information Officer
J. Sue Rozema............. Vice President, Investor
Relations and Treasurer
Larry M. Smith............ Controller
Keith D. Hartje........... Manager, Corporate
Communications
Alan L. Wells............. Manager, Corporate
Development & Strategy
Jack L. Alexander......... Manager Human Resources
Charlene A. Osier......... Manager Shareholder Services
Paul A. Bjork............. Shareholder Administrator
Jackie A. Fulhart......... Senior Shareholder Analyst
Marv E. Kingery........... Shareholder Analyst
L. Jene Spurgin........... Investor Relations
Coordinator
Tom C. Foster............. Finance & Investment
Administrator
James C. Galt............. Manager Financial Planning
Richard T. Tunning........ Manager Corporate Accounting
John P. Palmolea.......... Senior Accountant
Merlyn F. Wiese........... Senior Financial Analyst
James C. Parker........... Senior Bulk Power Engineer
James J. Howard........... Vice President, Gas
Administrator Services
Patrick A. Kirchner....... Attorney
Maureen E. Sammon......... Manager Benefits
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
David C. Caris............ Manager Governmental Affairs
Garry W. Osborn........... Strategic Planner
George L. Phillips........ Manager Corporate
Performance
Thomas C. Watt............ Manager Waterloo District
Virginia A. Dasso......... Manager Mississippi Valley
Greg B. Elden............. Manager Siouxland District
Robert L. Lester.......... Manager Des Moines District
Lester A. Juon............ Manager Sioux City District
John A. Harvey............ Manager Distribution
Operations Support
Annette J. Johnston....... Manager Customer Support
Christian M. Swanson...... Manager Cedar Valley
District
Ronald E. Unser........... Manager Quad Cities District
Jeanette I. Lose.......... Manager Credit
Barb J. Anderson.......... Executive Assistant
William G. Stowe.......... Manager Electric Operations
David L. Graham........... Manager Electric Energy
Services
James E. Wilson........... Manager Regulatory Affairs
Chuck H. Golliher......... Manager Purchasing
Sally A. Robinson......... Supervisor Office Services
John F. McCarroll......... Media and Investor Relations
Coordinator
Kim K. Koster............. Regional Communications
Coordinator
Kelly I. Sankey........... Customer Communications
Coordinator
</TABLE>
A-3
<PAGE> 65
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
Tim D. Grabinski.......... Regional Communications
Coordinator
Jodi E. Bacon............. Manager Human Resources
Communications
Suzan M. Stewart.......... Managing Attorney Gas Law
Department
Charles R. Montgomery..... Senior Attorney
Steven R. Weiss........... Senior Attorney
Terry R. Fox.............. Attorney
J. Christopher Cook....... Attorney
Barb A. Pollastrini....... Employee Communications
Coordinator
Karen P. Johnson.......... Communications Specialist
Mary C. Nelson............ Labor Relations Attorney
Janet H. Trentmann........ Corporate Human Resources
Consultant
Thomas J. Sweeney......... Supervisor, Employment &
Development
Gary Richardson........... Manager Electric Operations
John J. Cappello.......... Vice President, Marketing
Stephen E. Hollonbeck..... Senior Vice President, Gas
Operations
Stephen E. Shelton........ Senior Vice President,
Electric Distribution
James R. Bull............. Vice President, Generation
Mark W. Roberts........... Manager Electric
Administrator Services
O. Dale Stevens........... Manager Resource Planning
James Averweg............. Manager Transmission
William D. Leech.......... Manager Generation
Brent E. Gale............. Vice President, Law &
Regulatory Affairs
Gregory C. Schaefer....... Manager Electric Rates &
Regulation
Taylor S. Davis........... Attorney
Karen M. Huizenga......... Attorney
Robert P. Jared........... Attorney
Randall B. Palmer......... Attorney
Jean F. Stier............. Shareholder Representative
L.T. Smith................ Manager Loess Hills District
John H. Wetzel............ Economic Development
Consultant
Martha A. Matthews........ MIS Analyst
David C. Weiss............ Customer Coordinator
Jeffrey J. Gust........... Senior Bulk Power Engineer
Richard J. Singer......... Manager Nuclear
James M. Howard........... Customer Coordinator
Marcia L. Vest............ Accounting Assistant
John T. Holmes............ IT Training Coordinator
Debra L. Calvert.......... Economic Development
Consultant
Thomas H. Hutchins........ Gas Engineer
Mark K. Etchen............ Supervisor Customer
Coordination
Mary J. Brown............. Human Resources Analyst
Brian E. Johnson.......... Manager State Government
Relations
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
LeAnne S. Turner.......... Customer Service
Robert M. Ockerman........ Customer Coordinator
Connie L. Schwab.......... Customer Service
Juanita F. Mosher......... Customer Coordinator
Assistant
Robin B. Fortney.......... Senior Environmental
Coordinator
Deb J. Kraft.............. Secretary
Dian E. Nowell............ Records Management Assistant
Joel D. Krusemark......... Gas Technician
Michelle G. Sieren........ Call Center Supervisor
Linda W. Ruble............ Employee Communications
Coordinator
John L. Mehalovich........ Retiree
Rodney L. Schroeder....... Customer Coordinator
Dawn M. Martino........... Customer Coordinator
Jane M. Bushbaum.......... Human Resources Consultant
William G. Nowell......... Manager Electric Operations
Eric C. Heikes............ Customer Coordinator
Nancy Lynn Hall........... Customer Service
Representative
Steven E. Verbeski........ Manager, Corporate Insurance
David J. Anderson......... Manager, Combustion Turbines
Donald A. York............ Employment Development
Specialist
Robert Wrobel............. Operations Manager Appliance
Service Division
Roger T. Ringo............ Marketing Representative
Evonne E. Schaaf.......... Administrative Assistant
JoAnne F. Hauserman....... Records Management Assistant
Kyle M. Whitaker.......... Energy Consultant
Ralph C. Watts............ Project Manager
Kristi B. Krueger......... Human Resources Analyst
Tina M. Johnson........... Customer Coordinator
Tammy J. Summy............ Customer Coordinator
Charles B. Woods.......... Customer Coordinator
Michelle A. Bernholtz..... Energy Services Specialist
Alan R. Oneal............. Senior Bulk Power Engineer
Michele K. Sheehey........ Energy Services Specialist
Kathryn M. Curran......... Legislative Communications
Coordinator
Patrick E. Keener......... Manager Energy Consultants
Garrett O. Baldwin........ Energy Consultant
Jennifer J. Chaplin....... Customer Coordinator
Mark W. Albright.......... Senior Engineer
Veronica L. Danner........ Administrative Assistant
Teresa L. Nielsen......... Administrative Assistant
Kenneth D. Setzkorn....... Senior Energy Consultant
Nancy J. Anderson......... Human Resources Assistant
Vickie L. Wonder.......... Human Resources Analyst
Charles W. Krueger........ Senior Accountant
David R. Alberg........... Energy Consultant
Janet K. Woods............ Legal Assistant
Corey C. Phelps........... Tree Trimming Specialist
Thomas P. Nolan........... Payroll Tax Accountant
Polly A. Fortune.......... Financial Analyst
</TABLE>
A-4
<PAGE> 66
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
Sara J. Schillinger....... Manager Gas Supply
Robert W. Vargason Jr..... Corporate Safety &
Facilities Supervisor
Jeffrey S.
Liittschwager........... Senior Accountant
Craig M. Nelson........... Facility Coordinator
Edwin R. Kasner........... Retiree
James P. Diemer........... Senior ROW Agent
Teresa M. Anderson........ Manager Property Accounting
Donald O. Jennings........ MIS Analyst
Steven L. Haacke.......... Manager Project Engineering
Larry L. Loring........... General Manager Appliance
Service Division
James R. Rasley, Jr....... Energy Consultant
Jacqueline C. Cassity..... Auditor
Diane S. McGee............ IT Supervisor
Muriel A. Boggs........... Drug Testing Administrator
Winston A. Morrill........ Senior Financial Analyst
Michelle Book............. Property Accountant
Steven J. Kehoe........... Senior Energy Consultant
Jay H. Dillavou........... Environmental Coordinator
Brian J. Gannon........... Senior Accountant
Patricia M. Morin......... Energy Consultant
Sarah L. Peters........... Communications Specialist
Thomas B. Specketer....... Manager General Accounting
William E. Turnbull....... Senior Engineer
Mark C. Yocum............. Manager Accounting Systems
Support
Jean Olmstead............. Retiree
Monte G. Hauserman........ Safety Training Coordinator
Timothy A. Leach.......... Economic Development
Consultant
Rex G. McClaflin.......... Energy Consultant
Jeffrey S. Trometer....... Supervisor, Corporate
Security
Tom H. Sofianos........... Engineer
Kevin M. Lonergan......... Supervisor Electric Meter
Shop
Anne R. McGlynn........... Manager Call Centers
Mark E. Nibaur............ Manager Customer Offices
Rich G. Lovig............. Manager Meter Reading
Jennifer L. Gill.......... Credit Representative
Gail L. Tucker............ Credit Representative
Annette R. Julson......... Manager Building &
Remittance
J. Dean Service........... Customer Support
Representative
Cheryl I. Smith........... Supervisor Call Center
David C. Tubbs............ Senior Engineer
John W. Roche............. Manager Fuel & JOU
Paul E. Freund............ Fuel Supply Contract
Administrator
Steve C. Imming........... Fuel Supply Contract
Administrator
Tom C. Mielnik............ Manager System Planning
Roland E. Youngberg....... Supervising Engineer
Rich W. Polesky........... Manager Substation
Engineering
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
K.T. (Tom) Albertson...... Manager Transmission
Engineering
Jim L. Roseman............ Senior Engineer
Karl A. Donaubauer........ Engineer
Kathy J. Wylic............ Supervisor Drafting
Paul L. Waytenick......... Engineer
Mike G. Held.............. Supervising Engineer
Jim A. Hetterick.......... Senior Engineer
Jim P. Swanson............ Senior Engineer
Ken E. Moss............... Senior Engineer
Dehn A. Stevens........... Engineer
Neil D. Hammer............ Senior Engineer
Larry T. Davis............ Senior Engineer
Steve P. Ryan............. Senior Transmission Analyst
Darrel R. Gunst........... Manager Transmission Service
Doug J. Breon............. Senior Engineer
Ralph W. Martens.......... Engineer
Steve L. Morrison......... Manager Energy Consultants
Melanie A. Acord.......... Energy Consultant
Donnie R. Dunbar.......... Energy Consultant
F.A. (Rich) Leuthauser.... Energy Efficiency Analyst
Patrick F. Casey.......... Economic Development
Consultant
John D. Fringer........... Manager Market Planning
Suzie J. Knoedel.......... Market Research Specialist
Laurie L. Benson.......... Communications & Training
Specialist
Andrew S. Logsdon......... Manager Products & Services
Barb A. Schaab............ Senior Financial Analyst
Kay A. Twigg.............. Senior Accountant
Cathy S. Woollums......... Manager Environmental
Services
Debbie L. Kutsunis........ Senior Rates Analyst
Steve P. Stratton......... Senior Rates Analyst
Tim W. Tessier............ Rates Analyst
Londa R. Youngblood....... Legal Assistant
Ron J. Mueller............ Senior HR Consulant-Electric
Mary C. McGivern.......... Employment & Development
Specialist
Gary L. Coon.............. Facilities Supervisor
Jud C. Awkerman........... Supervisor Office Support
Dean T. Merrill........... Products and Services
Developer
Mary J. Zanter............ Project Engineer
Christy C. Atchison....... Gas Technician
Kelly S. Kuhl............. Gas Technician
Marcia R. Boon............ Gas Support Analyst
Rich P. Pennington........ Gas Support Analyst
Leann M. Blankenburg...... Gas Safety/Training
Assistant
Sue E. Brock.............. Gas Service Dispatcher
Linda Crawford-Reed....... Gas Service Dispatcher
Mike P. Eiden............. Gas Service Dispatcher
Jan M. Graves............. Gas Service Dispatcher
David R. Jahn............. Gas Service Dispatcher
William G. Jones.......... Gas Service Dispatcher
</TABLE>
A-5
<PAGE> 67
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
Jeni L. Mahnke............ Gas Service Dispatcher
Sheri R. Moore............ Gas Service Dispatcher
Wanda M. Nelson........... Gas Service Dispatcher
Travis L. Rich............ Gas Service Dispatcher
Debi S. Rico.............. Gas Service Dispatcher
Travis W. Thomas.......... Gas Service Dispatcher
Melissa A. McDevitt-
Ahlquist................ Gas Service Dispatcher
Beth R. Stockfleth........ Gas Service Dispatcher
Mary Jane VanHouten....... Gas Service Dispatcher
Sandy K. Rasmussen........ Senior Gas Engineer
Cindi K. Swenson.......... Gas Technician
Terry W. Slaughter........ Senior Energy Consultant
Diane E. Neri............. Energy Services Specialist
Kimberly A. Willer........ Energy Services Specialist
Brad L. Howard............ Energy Consultant
Terry M. O'Gorman......... Marketing Information
Specialist
Debbie J. Sypersma........ Products & Services
Administrator
Larry J. Debuse........... Products & Services
Developer
Dave L. Halligan.......... Gas Supply Assistant
Ken H. Finch.............. Gas Supply Analyst
Pam A. Miller............. Gas Supply Analyst
Carla J. Muller........... Gas Supply Analyst
Phil L. Ramsey............ Gas Supply Analyst
Vic C. Peterson........... Gas Supply Analyst
Marty J. Mills............ Gas Supply Analyst
Jerry L. Sherwood......... Gas EMS Analyst
Robin J. Fuller........... Gas Supply Assistant
Brian W. O'Hara........... Gas Supply Strategist
Mark A. McCabe............ Gas Supply Strategist
Linda K. Carter........... Secretary
Marv G. Sorensen.......... Gas Pricing Strategist
Cheryl L. Andrews-
Trowbridge.............. Financial Analyst
Roger J. Miltenberger..... Senior Financial Analyst
Dale R. Swan.............. Senior Financial Analyst
Kim P. Blaeser............ Senior Accountant
Jane M. Dutler............ Accounting Assistant
Carolyn M. Zellmer........ Legal Assistant
Deb A. Martin............. Senior Legal Assistant
Nancy A. Smith............ Admin. Assistant
Dean A. Bohlken........... Design Technician
Steve E. Lofshult......... Design Technician
Terri L. Ivahoff.......... Buyer
Robin R. Nelson........... Purchasing Assistant
Doug C. Howe.............. Purchasing Analyst
Barb J. Ulferts........... Purchasing Assistant
Bill G. Peterson.......... HR Consultant
Jan E. Amick.............. Employment & Development
Specialist
Sandy C. Thorpe........... Sr. Systems Analyst
Janice L. Clay............ System Assurance Assistant
Denise J. Moody........... Systems Analyst
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
Wes A. Wepler............. Systems Analyst
Rob D. Held............... Systems Analyst
Donna S. Breed............ Systems Analyst
Leslie K. Weber........... Systems Analyst
Judy J. Meyers............ Sr. Systems Analyst
Kelly S. Ryan............. IT Specialist
Jackie Dehaan............. Secretary
Rick Book................. Supervisor Facilities
Henry D. Baker............ Supervisor Office Support
John Brun................. Energy Consultant
Mark Hewett............... Manager, Gas Supply Planning
Tammy J. Jensen........... Senior Accountant
Martha Krone.............. Workers' Compensation
Coordinator
Mark Mrla................. Manager, IT Systems
Assurance
John Rexwinkel............ Energy Consultant
Sandra K. Rodman.......... Temporary Employee
Tracy S. Thorne........... Energy Consultant
Judith A. Twiford......... Senior Financial Analyst
Lawrence A. Bick.......... Manager, Gas Engineering
Steven C. Prachar......... Energy Consultant
Angel F. Blanchard........ MIS Analyst
Frank E. DeLouis.......... Electric Operations
Consultant
Jack J. Fries............. Senior Accountant
Andy A. Jensen............ Senior Nuclear Planning
Engineer
Jean E. Moureau........... Right-Of-Way Agent
Ken W. Plummer............ Systems Analyst
Gus R. Skovgard........... Manager Governmental
Relations (Federal)
Cathy J. Smith............ Senior MIS Analyst
Larry C. Strachota........ Manager Distribution
Engineering
Lori G. Sweeney........... Tax Accountant
Terry L. Wilson........... Administrative Assistant
Dave L. Wisniewsky........ Manager Electric Operations
(South)
Martin Longenecker........ Load Forecast Specialist
Rod A. Boyle.............. Manager Energy Efficiency
Kenneth R. Myers.......... Energy Efficiency Analyst
Christine M. Fennesy...... Energy Efficiency Specialist
Matthew E. Daunis......... Energy Efficiency Analyst
John D. Soper............. Energy Efficiency Accountant
Judith A. Moore........... Energy Efficiency Accountant
Linda A. Glynn............ Energy Efficiency Specialist
Gordon W. Sparks.......... Energy Efficiency Analyst
Linda J. Cousino.......... Administrative Assistant
Leonard (Fred) F. Hoots... Senior Engineer
Molly Litwiler............ Administrative Assistant
Carol A. Slentz........... Drafter
Diane E. Aitken........... Engineer/Engineering
Technician
Gary F. Kruempel.......... Manager Generation
Engineering
</TABLE>
A-6
<PAGE> 68
<TABLE>
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
Tom A. Gesell............. Manager Gas Supply
Operations
Wendell R. Hubert......... Manager Peak Plants and
Metering
Gerald M. Ruba............ Retiree
Dillon, Read & Co. Inc.
Kenneth S. Crews.......... Managing Director
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite
3950
Dallas, Texas 75201
James W. Hunt............. Managing Director
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite
3950
Dallas, Texas 75201
Jason D. Sweet............ Managing Director
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite
3950
Dallas, Texas 75201
<CAPTION>
NAME AND BUSINESS ADDRESS
(UNLESS OTHERWISE
INDICATED,
THE BUSINESS ADDRESS IS PRESENT POSITION WITH
MIDAMERICAN ENERGY MIDAMERICAN
COMPANY, OR OTHER PRINCIPAL
666 GRAND AVENUE, OCCUPATION
DES MOINES, IOWA 50303) OR EMPLOYMENT
- -------------------------- ----------------------------
<S> <C>
James Brandi.............. Managing Director
Dillon, Read & Co. Inc.
535 Madison Avenue
New York, NY 10022
Jeffrey W. Miller......... Vice President
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite
3950
Dallas, Texas 75201
Forrest D. Williams....... Analyst
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite
3950
Dallas, Texas 75201
Eliot Merrill............. Analyst
Dillon, Read & Co. Inc.
535 Madison Avenue
New York, NY 10022
</TABLE>
A-7
<PAGE> 69
ANNEX B
IES SHARES HELD BY MIDAMERICAN, ITS DIRECTORS AND EXECUTIVE OFFICERS AND
CERTAIN EMPLOYEES AND OTHER REPRESENTATIVES OF MIDAMERICAN WHO
MAY ALSO SOLICIT PROXIES, AND CERTAIN TRANSACTIONS
BETWEEN ANY OF THEM AND IES
As of the date of this Proxy Statement, MidAmerican had no security
holdings in IES. Regina Rae Huggins, a person who will solicit proxies, is the
beneficial owner of four (4) shares of common stock, no par value, of IES (the
"IES Common Stock"). John W. Colloton's wife is the beneficial owner of 250
shares of IES Common Stock with respect to which Mr. Colloton disclaims any
beneficial ownership. Leonard L. Woodruff is the beneficial owner of 100 shares
of IES Common Stock. Jackie A. Fulhart is the beneficial owner of 305 shares of
IES Common Stock. Christian M. Swanson's wife is the beneficial owner of 12
shares of IES Common Stock. Jean Olmstead is the beneficial owner of 300 shares
of IES Common Stock.
Other than as set forth above, as of the date of this Proxy Statement,
neither MidAmerican nor any of its directors, executive officers or other
representatives or employees of MidAmerican, or other persons known to
MidAmerican who may solicit proxies, has any security holdings in IES except
that MidAmerican has not yet been able to obtain any information with respect to
the security holdings of IES, if any, of Steve R. Weiss, John J. Cappello,
Stephen E. Hollonbeck, Gregory C. Schaefer, L.T. Smith, Robin B. Fortney, Rodney
L. Schroeder, Jay H. Dillavou, Patricia M. Morin, Thomas B. Specketer, Mark C.
Yocum, Rex G. McClaflin, Jeffrey S. Trometer, Tom H. Sofianos, Kevin M.
Lonergan, Anne R. McGlynn, Jennifer L. Gill, Gail L. Tucker, Annette R. Julson,
J. Dean Service, Cheryl I. Smith, David C. Tubbs, John W. Roche, Paul E. Freund,
Steve C. Imming, Tom C. Mielnik, Roland E. Youngberg, Rich W. Polesky, K.T.
(Tom) Albertson, Jim L. Roseman, Karl A. Donaubauer, Kathy J. Wylic, Paul L.
Waytenick, Mike G. Held, Jim A. Hetterick, Jim P. Swanson, Ken E. Moss, Dehn A.
Stevens, Nell D. Hammer, Larry T. Davis, Steve P. Ryan, Darrel R. Gunst, Doug J.
Breon, Ralph W. Martens, Steve L. Morrison, F.A. Leuthauser, John D. Fringer,
Suzie J. Knoedel, Laurie L. Benson, Barb A. Schaab, Kay A. Twigg, Cathy S.
Woollums, Debbie L. Kutsunis, Steve P. Stratton, Tim W. Tessier, Ron J. Mueller,
Mary C. McGivern, Dean T. Merrill, Mary J. Zanter, Christy C. Atchison, Rich P.
Pennington, Leann M. Blankenburg, Sue E. Brock, Linda Crawford-Reed, Mike P.
Eiden, Jan M. Graves, David R. Jahn, William G. Jones, Jeni L. Mahnke, Sheri R.
Moore, Wanda M. Nelson, Travis L. Rich, Debi S. Rico, Travis W. Thomas, Melissa
A. McDevitt-Ahlquist, Beth R. Stockfleth, Mary Jane Vanhouten, Sandy K.
Rasmussen, Cindi K. Swenson, Diane E. Neri, Brad L. Howard, Terry M. O'Gorman,
Debbie J. Sypersma, Larry J. DeBuse, Dave L. Halligan, Ken H. Finch, Pam A.
Miller, Carla J. Muller, Phil L. Ramsey, Vic C. Peterson, Marty J. Mills, Jerry
L. Sherwood, Robin J. Fuller, Brian W. O'Hara, Linda K. Carter, Marv G.
Sorensen, Cheryl L. Andrews-Trowbridge, Roger J. Miltenberger, Dale R. Swan, Kim
P. Blaeser, Jane M. Dutler, Deb A. Martin, Nancy A. Smith, Dean A. Bohlken,
Steve E. Lofshult, Terri L. Ivahoff, Robin R. Nelson, Doug C. Howe, Barb J.
Ulferts, Bill G. Peterson, Jan E. Amick, Sandy C. Thorpe, Janice L. Clay, Denise
J. Moody, Wes A. Wepler, Rob D. Held, Donna S. Breed, Leslie K. Weber, Judy J.
Meyers, Kelly S. Ryan, Rick Book, Angel F. Blanchard, Frank E. DeLouis, Jack J.
Fries, Andy A. Jensen, Jean E. Moureau, Ken W. Plummer, Gus R. Skovgard, Cathy
J. Smith, Larry C. Strachota, Lori G. Sweeney, Terry L. Wilson, Dave L.
Wisniewsky, Martin Longenecker, Rod A. Boyle, Kenneth R. Myers, Christine M.
Fennesy, Matthew E. Daunis, John D. Soper, Judith A. Moore, Linda A. Glynn,
Gordon W. Sparks, Linda J. Cousino, Leonard (Fred) F. Hoots, Molly Litwiler,
Carol A. Slentz, Diane E. Aitken, Gary F. Kruempel, Tom A. Gesell, Wendell R.
Hubert and Gerald M. Ruba. MidAmerican disclaims beneficial ownership of any
securities of IES held by any pension plan of MidAmerican or by any affiliate of
MidAmerican.
Although Dillon, Read & Co. Inc. ("Dillon Read"), financial advisors to
MidAmerican, do not admit that they or any of their directors, officers,
employees or affiliates are a "participant," as defined in Schedule 14A
promulgated under the Securities Exchange Act of 1934 by the Securities and
Exchange Commission, or that such Schedule 14A requires the disclosure of
certain information concerning Dillon Read, Kenneth S. Crews (Managing
Director), James W. Hunt (Managing Director), Jeffrey W. Miller (Vice
President), Jason D. Sweet (Managing Director), Forrest D. Williams (Analyst),
James Brandi (Managing Director), and Elliot Merrill (Analyst), in each case of
Dillon Read, who may assist MidAmerican in such a solicitation.
B-1
<PAGE> 70
Dillon Read engages in a full range of investment banking, securities trading,
market-making and brokerage services for institutional and individual clients.
In the normal course of their business, Dillon Read may trade securities of IES
for their own account and the account of their customers and, accordingly, may
at any time hold a long or short position in such securities. As of the most
recent practicable date prior to the date hereof as such information was
available, Dillon Read did not hold any securities of IES.
Except as disclosed above, to the knowledge of MidAmerican, none of
MidAmerican, the directors or executive officers of MidAmerican or the employees
or other representatives of MidAmerican named above has any interest, direct or
indirect, by security holdings or otherwise, in IES.
B-2
<PAGE> 71
- ---------------------------------------------------
---------------------------------------------------
- --------------------------------------------------------------------------------
IMPORTANT
TIME IS OF THE ESSENCE
YOUR VOTE IS IMPORTANT AND TIME IS OF THE ESSENCE. REGARDLESS OF THE
NUMBER OF SHARES YOU OWN, PLEASE VOTE BY FOLLOWING THESE SIMPLE STEPS:
1. IF YOUR SHARES ARE HELD IN YOUR OWN NAME, PLEASE SIGN, DATE AND
MAIL THE ENCLOSED BLUE PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED WITH THIS LETTER. TIME IS OF THE ESSENCE, SO PLEASE ACT
TODAY.
2. IF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, PLEASE
SIGN, DATE AND MAIL THE BLUE PROXY WHEN YOU RECEIVE IT FROM YOUR
BROKER. PLEASE DO SO FOR EACH ACCOUNT YOU MAINTAIN. TO BE SURE
THAT YOUR IES SHARES ARE VOTED, YOU SHOULD ALSO CALL AND INSTRUCT
YOUR BROKER TO EXECUTE A BLUE PROXY ON YOUR BEHALF.
3. TO BE SURE YOUR LATEST DATED PROXY IS A BLUE CARD VOTING AGAINST
THE PROPOSED WISCONSIN TRANSACTION, DO NOT RETURN ANY WHITE OR
GREEN PROXY CARD SENT TO YOU BY IES.
4. IF YOU HAVE ALREADY VOTED FOR THE PROPOSAL ON IES' WHITE OR GREEN
PROXY CARD, IT IS NOT TOO LATE TO CHANGE YOUR VOTE -- SIMPLY SIGN,
DATE AND MAIL THE BLUE PROXY CARD. ONLY YOUR LATEST DATED PROXY
WILL BE COUNTED.
PLEASE RETURN YOUR BLUE PROXY CARD AT ONCE TO ENSURE THAT YOUR VOTE
IS COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE MEETING
SHOULD YOU ATTEND. IF YOU HAVE ANY QUESTIONS OR REQUIRE ANY ASSISTANCE IN
VOTING YOUR SHARES, PLEASE CALL:
D.F. KING & CO., INC.
BANKS AND BROKERS CALL (212) 269-5550
-OR-
MIDAMERICAN ENERGY COMPANY
CALL TOLL-FREE: 1-888-776-4692
<PAGE> 72
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY SOLICITED BY MIDAMERICAN ENERGY COMPANY
IN OPPOSITION TO THE PROXY SOLICITED BY THE DIRECTORS OF
IES INDUSTRIES INC.
The undersigned, a holder of record of shares of common stock,
without par value (the "Shares"), of IES Industries Inc., an Iowa
corporation ("IES"), at the close of business on July 10, 1996 (the
"Record Date"), hereby appoints Stanley J. Bright, J. Sue Rozema and
Paul J. Leighton, or any of them, the proxy or proxies of the
undersigned, each with full power of substitution, to attend the
Annual Meeting of IES Shareholders to be held on September 5, 1996
(and any adjournments, postponements, continuations or reschedulings
thereof), at which holders of Shares will be voting on, among other
things, approval of the Agreement and Plan of Merger, dated as of
November 10, 1995, as amended (the "Merger Agreement"), among
Interstate Power Company, an Iowa corporation ("Interstate"), WPL
Holdings, Inc., a Wisconsin corporation ("WPL"), IES, WPLH Acquisition
Co., a Wisconsin corporation and a wholly-owned subsidiary of WPL, and
Interstate Power Company, a Wisconsin corporation and a wholly-owned
subsidiary of Interstate, providing for the combination of IES,
Interstate and WPL (the "Proposed Wisconsin Transaction"), and to vote
as specified in this proxy all the Shares which the undersigned would
otherwise be entitled to vote if personally present. If no vote is
specified, the undersigned will be deemed to have voted AGAINST
approval of the Merger Agreement and to have abstained on the election
of directors. The undersigned hereby revokes any previous proxies with
respect to the matters covered in this Proxy.
THE BOARD OF DIRECTORS OF MIDAMERICAN ENERGY COMPANY RECOMMENDS A
VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT. IF RETURNED CARDS ARE
SIGNED BUT NOT MARKED, THE UNDERSIGNED WILL BE DEEMED TO HAVE VOTED
AGAINST APPROVAL OF THE MERGER AGREEMENT AND TO HAVE ABSTAINED ON THE
ELECTION OF DIRECTORS.
<PAGE> 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF MIDAMERICAN ENERGY COMPANY RECOMMENDS A VOTE
AGAINST PROPOSAL 1.
1. Approval of Merger Agreement / / AGAINST / / FOR / / ABSTAIN
2. The election of directors: FOR ALL / / AGAINST ALL / /
EXCEPTIONS / / ABSTAIN / /
Nominees: C.R.S. Anderson; J. Wayne Bevis; Lee Liu; Jack R. Newman;
Robert D. Ray; David Q. Reed; Henry Royer;
Robert W. Schlutz; Anthony R. Weiler.
Exceptions(s):
In their discretion, the Proxies
are authorized to vote upon such
other business as may properly
come before the meeting or any
adjournments, postponements,
continuations or reschedulings
thereof.
Dated: , 1996
--------------------------------
Signature (Title, if any)
--------------------------------
Signature if held jointly
Please sign your name above
exactly as it appears hereon.
When Shares are held of record
by joint tenants, both should
sign. When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If a corporation,
please sign in full corporate
name by president or authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
<PAGE> 74
EXHIBIT A
(NOT DISTRIBUTED TO SHAREHOLDERS)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Proxy Statement dated August 19, 1996 of our report dated
January 26, 1996 included in MidAmerican Energy Company's Form 10-K for the year
ended December 31, 1995 and to all references to our Firm included in this Proxy
Statement.
/s/ ARTHUR ANDERSEN LLP
--------------------------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois
August 19, 1996
<PAGE> 75
EXHIBIT B
(NOT DISTRIBUTED TO SHAREHOLDERS)
CONSENT OF INDEPENDENT AUDITORS
MidAmerican Energy Company:
We consent to the incorporation by reference in this Proxy Statement of our
reports dated January 25, 1995, covering the consolidated balance sheet and
statement of capitalization of Iowa-Illinois Gas and Electric Company and
subsidiary as of December 31, 1994, and the related consolidated statements of
income, retained earnings and cash flows for the years ended December 31, 1994
and 1993, and the schedule listed in Item 14(a)(2) as of December 31, 1994 and
1993 and for each of the two years in the period ended December 31, 1994,
appearing in MidAmerican Energy Company's Form 10-K for the year ended December
31, 1995. It should be noted that we have not audited any financial statements
of Iowa-Illinois Gas and Electric Company and subsidiary subsequent to December
31, 1994, or performed any audit procedures subsequent to the date of our
reports.
/s/ DELOITTE & TOUCHE LLP
--------------------------------------
DELOITTE & TOUCHE LLP
August 19, 1996