SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Defintive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
IES INDUSTRIES INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[X] 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
<PAGE>
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:
$500,063
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(2) Form, Schedule or Registration Statement No.:
PRELIMINARY PROXY MATERIALS of WPL HOLDINGS, INC., IES INDUSTRIES INC.
and INTERSTATE POWER COMPANY, JOINT PROXY STATEMENT of WPL HOLDINGS,
INC., IES INDUSTRIES INC. and INTERSTATE POWER COMPANY AND PROSPECTUS
of WPL HOLDINGS, INC. and INTERSTATE POWER COMPANY, ON FORM S-4 FILE
NO. 333-07931, and SUPPLEMENT TO JOINT PROXY STATEMENT and PROSPECTUS
SUPPLEMENT, ON FORM S-4 amended by FORM S-4/A FILE NO. 333-10401
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(3) Filing Party:
IES INDUSTRIES INC, WPL HOLDINGS, INC and INTERSTATE POWER COMPANY
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(4) Date Filed:
JANUARY 18, 1996, JULY 11, 1996, AUGUST 19, 1996 and AUGUST
22, 1996
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<PAGE>
For Release: August 28,1996
Contact: Diane Ramsey (Media) (319) 398-7288
Denny Vass (Financial) (319) 398-4475
EDWARD D. JONES & CO. RECOMMENDS APPROVAL OF
THREE-WAY UTILITY MERGER
CEDAR RAPIDS, IOWA--Citing its conclusion that the strategic three-way
Interstate Energy Corp. merger "creates enhanced quality long term for IES
shareholders as well as provides for an increased dividend that is sustainable
and a substantial premium for IES shares," Edward D. Jones & Co. has recommended
shareowner approval of a proposed business combination involving IES Industries
Inc., Interstate Power Co. and WPL Holdings, Inc. Jones stated that it "has
participated in a public offering of securities of IES Industries and WPL
Holdings."
IES, WPL Holdings and Interstate Power announced plans in November 1995 to
combine as Interstate Energy Corp. On August 4, MidAmerican Energy Co. (MEC), of
Des Moines, made an unsolicited proposal to acquire IES. On August 16, the
MidAmerican offer was rejected by the IES board of directors, and a revised
stock- exchange ratio for IES shareowners was announced by the three merger
partners.
Edward D. Jones & Co., a national investment banking firm, yesterday released an
analysis that supports the three-way combination. In making its recommendation,
Jones indicated in its assessment that the "three-way combination will create a
low-cost regional and national utility that is able to compete, a secure
dividend, added synergies that lead to future cost savings and a financially
stable balance sheet." Jones also cited IEC's "higher chances for success."
Jones believes the new IEC stands an enhanced ability to be approved in a timely
manner. Specifically, the report noted that the proposal to create Interstate
Energy Corp. has already passed the statutory review period under the
Hart-Scott-Rodino antitrust Act.
This is the second endorsement of the three-way merger by a major investment
firm. Both Edward D. Jones & Co. and Robert W. Baird & Co., which on August 19
also recommended shareholder approval of the IEC merger, are based in the
Midwest. IES believes both firms more fully understand the benefits of the IEC
combination and the political and regulatory realities associated state
regulatory approval processes in the region.
Once shareowner and regulatory approvals are received, IEC will form the 34th
largest utility holding company in the United States, with more than one million
electric and natural gas customers in four states.
<PAGE>
IES, IPC and WPLH will hold separate shareowner meetings on September 5, at
which shareowners will vote on the three-way combination to form Interstate
Energy Corp.
Edward D. Jones & Co. is headquartered in St. Louis, Missouri, and has more than
3,300 branch offices in 49 states.
Talking points for Lee Liu
Presentation to Cedar Rapids Community Meeting
(Shareholders/Employees/Customers in audience)
August 28,1996
Good morning, Whether you're a customer, shareholder, or employee of IES
Industries, I want to thank each and every one of you for taking time today to
be with us. For many months we've been fine-tuning our plan to create a
strategic regional alliance and preparing for September 5, the day our
shareholders vote on this carefully developed partnership.
With shareholders' approval, IES is merging with Interstate Power Company of
Dubuque and WPL Holdings, the parent company of Wisconsin Power and Light of
Madison, Wisconsin. That three-way combination, a first in the nation for the
electric utility industry, would create Interstate Energy corporation, a
regional diversified energy company.
Our partnership brings together three high-quality companies whose work ethics,
company cultures and visions harmoniously align. We're three well-managed
utilities and low-cost providers with long histories of increased dividends for
our customers. We are companies who strongly believe that our future business
activities will be significantly enhanced, adding value to our customers and
communities.
We are here today to talk about a three way merger because we care about how the
new company will impact our communities and customers.
First of all, let me share with you what the three-way merged company will be as
an energy service business. We will be thirty-fourth in size among the two
hundred plus publicly owned utility companies in the nation. It will truly be a
regional company, transcending state boundaries, with a diversified customer
base in four Midwestern states. It is a combination of three low cost energy
providers with commitment to customers and communities. It is also a combination
of three well-managed companies with excellent past track records in community
commitment and financial performance.
For communities like Cedar Rapids, the IEC merger means:
1. The utility operation business unit will be headquartered in Cedar Rapids.
This includes all utility operations in four states, namely Wisconsin,
Minnesota, Iowa and Illinois.
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2. Cedar Rapids will be the home of all non-utility businesses, including the
non-utility businesses under WPL Holdings. We also intend to develop and expand
our non-utility businesses in the near future.
3. Administrative support for IEC will be headquartered in Dubuque, which will
provide the needed administrative support for the entire company. Obviously, the
business activities in Dubuque will be greatly enhanced.
4. What will be in Wisconsin is the IEC Holding Company, and generation business
unit. We will also have IEC Holding Company offices in Cedar Rapids. The
executive team, including Erroll Davis, our designated CEO of the now company,
will spend a substantial amount of his time in Cedar Rapids -- he is currently
looking for a home here. Indeed, MC will have a strong presence in Cedar Rapids
and in Iowa as a whole.
5. I should also mention the Board of Directors of IEC will have nine from Iowa,
and six representing WPL Holding. I can assure you the Iowa interests will be
protected.
For our customers, the IEC merger will mean:
1. Lower cost and better service to our customers. I have asked Erroll Davis to
share with you and articulate on this particular point.
2. We embrace the concept of open competition just like what is going on in the
telecommunications industry because we believe competition will spur innovation
in service offerings and more competitive prices. We respect customer choices
and we do not believe in the concept of a single utility company in Iowa, just
the same as one supermarket or one gas station.
Employee Impact:
The IEC merger will have some impact in employment. However, I have always said
that our workforce is our most important asset. The three-way merger will adjust
the workforce in line with our natural attrition rate, approximately 3% a year
for three years. For the MidAmerican proposal, according to the information in
their proxy material, they plan to realize $28.7 million in labor savings. We
believe they plan to cut 480 jobs in the first year. Since the MidAmerican deal
is a proposal of purchase, as opposed to merger, they have made it clear that
the headquarters will no longer be in Cedar Rapids, but in Des Moines. We
believe the impact on our workforce and our community in Cedar Rapids and
surrounding area will be very significant.
Finally, for our shareholders:
The vote for September 5 is to vote up or down on the three-way merger which
will provide an IES share value of approximately
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$36.25 a share, a very significant pick up from $20.00 a share one year ago.
With an increase in dividend from our current $2.10 a share to $2.25 a share, we
believe this is a great gain for IES shareholders.
The MidAmerican proposal is merely "a proposal," with promises for the future:
they have not lived up to their promises in the past, and they offer weak
numbers to support the current ones. We urge our shareholders to vote for an
agreement that is concrete and real instead of a hypothetical one which may lead
to nowhere!
Finally, we have always been a company that is committed to long term growth for
both the company and the communities we are privileged to serve.
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August 27, 1996
Dear IES Employee:
Some of you may have recently received a letter from MidAmerican Energy Co.
regarding their hostile proposal to take over IES Industries. As part of our
ongoing communications to you, I would like to briefly address one of the
comforting but questionable promises that MidAmerican is making.
Of great concern to me is MidAmerican's promise about employee "job security" if
they are successful in taking over our company. MidAmerican said in its letter
that it expects to reduce employment by 450 positions at a combined
MidAmerican-IES, and that it would achieve this through attrition and other
"voluntary methods." However, we find MidAmerican's claims very difficult to
believe when we consider their track record and the cost savings they project
from a merger with IES.
You should be aware that in its last merger, MidAmerican initially estimated the
elimination of 250 jobs. The final reduction was actually 850 positions, or 20
percent of its workforce. How can we now trust their promise that no IES
employees will be laid off?
Furthermore, MidAmerican's dubious claims are not supported by its numbers. In
its proxy material, MidAmerican projects it will realize $650 million in cost
savings from a merger with IES. Based on our analysis of this projection, we
find it hard to believe that MidAmerican will be able to achieve this level of
savings without substantial layoffs. The MidAmerican proxy materials detail
labor savings of nearly $28.7 million in the first year. Assuming an average of
$60,000 of salary and benefits savings per employee, that savings translates to
nearly 480 positions in the first year alone.
A company's financial condition has a substantial effect on jobs. A
MidAmerican-IES combination could have a level of debt significantly higher than
the company that will result from the three-way merger. To pay the interest on
this debt and meet its promises to shareholders, MidAmerican would be under
pressure to continually cut costs with obvious consequences for employment
levels.
In contrast, the three-way merger among IES, WPLH and IPC will create a regional
powerhouse positioned to grow in the rapidly changing and increasingly
competitive utility industry. We believe this growth plan will create
opportunities over the long-term superior to anything a combination with
MidAmerican might offer.
Some of you have asked how the MidAmerican plan is different than Process
Redesign, under which IES has moderately reduced employment. Given MidAmerican's
track record of job cuts, we
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<PAGE>
feel that the two companies have very different philosophies. We have worked
very hard to keep Process Redesign as fair and humane as possible. We have
worked to redesign the work first, then looked at the jobs and skills necessary
to do that work. We have created numerous options for employees to seek new
positions and follow new opportunities. We have created a severance program that
we the employees who are affected recognize as generous. This, at a time when we
anticipate that fewer than 100 employees will involuntarily lose positions as a
result of Process Redesign. On the other hand, MidAmerican appears to have
followed a philosophy of simply reducing headcount to cut costs.
We understand that there is a lot of information and misinformation floating
around. We appreciate your continued interest and support. We will continue to
communicate to you through various methods to provide you with timely and
accurate information. In the meantime, if you have any questions regarding the
three-way merger, please call the employee merger hotline at 1-800-818-2041. It
is important to us that you are well informed about the events affecting IES.
Sincerely,
Lee Liu
Chairman of the Board, President & Chief Executive Officer
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<PAGE>
Interstate Energy Corporation--Service Territory
[MAP]
[LEGEND] WP&L
IES Utilities Inc.
Interstate Power Co.
[ORGANIZATION CHART]
INTERSTATE ENERGY CORPORATION
WP&L
Interstate Power Co.
IES Utilities Inc.
Diversified Companies
WPL Holdings, Inc.
222 W. Washington Avenue
P.O. Box 2568
Madison, Wisconsin 53701-2568
(608) 252-4888
http://www.wpl.com
IES Industries Inc.
200 First Street SE
P.O. Box 351
Cedar Rapids, Iowa 52406-0351
(319) 398-4411
http://ies-energy.com
Interstate Power Co.
1000 Main Street
P.O. Box 769
Dubuque, Iowa 52004-0769
(319) 582-5421
MERGER PROFILE
INTERSTATE ENERGY CORPORATION
[LOGO]
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<PAGE>
THE MERGER
Three high-quality, los-cost, innovative utility companies are merging to form a
new company poised to succeed in the increasingly competitive utility
marketplace. IES Industries Inc., Interstate Power Company and WPL Holdings,
Inc. will join forces to create Interstate Energy Corporation. The merger
agreement was announced Nov. 11, 1995. The merger is expected to be completed
during the first half of 1997 and must be approved by several state and federal
regulatory agencies.
The combination will result in the formation of a new holding company.
Interstate Energy Corporation will serve nearly one million electric and natural
gas customers in Iowa, Illinois, Minnesota and Wisconsin. The company's utility
subsidiaries, IES Utilities Inc., Interstate Power Company and Wisconsin Power &
Light Company, will maintain separate operations for a period of three years
after the completion of the merger. The headquarters of the utility companies
will remain in Cedar Rapids and Dubuque, Iowa, and Madison, Wis., respectively.
In addition, the companies' current diversified interests, IES Diversified Inc.
and Heartland Development Corporation, will be combined under one entity to
manage the diversified operations of the new parent company. Interstate Energy
Corporation will be the 34th-largest utility holding company in the United
States, and will be headquartered in Madison, Wisconsin.
The merger will provide the three companies a substantial competitive and
operational advantage within the region. By joining forces, the companies will
be better able to maintain low rates and high customer service levels, market
innovative new products and services and enhance future shareholder value.
THE LEADERSHIP
Lee Liu, presently chairman of the board, president & chief executive officer of
IES Industries, will serve as chairman of the board of Interstate Energy
Corporation once the merger is completed. Wayne Stoppelmoor, chairman, president
and chief executive officer of Interstate Power Company, will be vice chairman
of the combined company. Erroll Davis Jr., chairman, president and chief
executive officer of WPL Holdings, Inc. will become president and chief
executive officer of Interstate Energy Corporation. Two years after the
combination, Liu and Stoppelmoor will step down and Davis will succeed Liu as
chairman. The board of directors of Interstate Energy Corporation will be
composed of six directors of IES Industries, six directors of WPL Holdings and
three directors of Interstate Power Company.
[CHART: THE FACTS]
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<PAGE>
[PHOTO] "The combination of these companies will create significant, long-term
benefits for our employees, customers and shareholders." --Lee Liu, IES
Industries, Inc.
[PHOTO] "The electric utility world is changing around us and we must prepare
for the competitive era." --Wayne Stoppelmoor, Interstate Power Company
[PHOTO] "This combination will move WPL Holdings well along to becoming a
regionally and nationally competitive energy company." --Erroll Davis Jr., WPL
Holdings, Inc.
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<PAGE>
[MAP] INTERSTATE ENERGY CORPORATION
[LEGEND] WP&L
IES Utilities Inc.
Interstate Power Co.
[MAP] INTERSTATE ENERGY CORPORATION
[LEGEND] WP&L
IES Utilities Inc.
Interstate Power Co.
A growing and diversified regional customer base
Assets-$4.5 Billion
Over 850,000 electric customers
Over 360,000 gas customers
Service territory in Iowa, Illinois, Minnesota and Wisconsin
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IEC WILL MARKET TO DIVERSE AND GROWING INDUSTRIES
Customers-Major Industries
Food Products
Machinery & Metals
Chemicals
Transportation
Paper
Construction Equip.
IEC'S INVESTMENT IN COMMUNITIES IS REFLECTED IN RETAIL SALES GROWTH
[BAR GRAPH]
Represents Annual Growth Rate for 1991-1995
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<PAGE>
INTERSTATE ENERGY CORPORATION
[MAP]
[LEGEND] WP&L
IES Utilities Inc.
Interstate Power Co.
A low cost provider of electric power
Continued strong support of economic development
Low customer rates
Investments in communities we serve
AVERAGE INDUSTRIAL CUSTOMER CHARGE PER Kwh
[BAR GRAPH]
Source: EEI Rankings, 1995
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<PAGE>
AVERAGE RESIDENTIAL CUSTOMER CHARGE PER Kwh
[BAR GRAPH]
Source: EEI Rankings, 1995
IEC CORE BUSINESSES
[ORGANIZATIONAL CHART]
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<PAGE>
INVESTMENT RETURN COMPARISON
[BAR GRAPH]
Total Cumulative Investment Return
8/2/91-8/2/96
DIVIDEND COMPARISON
[BAR GRAPH]
5 Year Dividend Growth Rate
1991-1995
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DIVIDEND COMPARISON
[LINE GRAPH] Dividend Cut
[LINE GRAPH] Dividend Growth
DEBT LEVELS
[BAR GRAPH]
Pro Forma Debt Ratio
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<PAGE>
IEC GROWTH POTENTIAL
[PIE CHART]
MidAm DIVESTITURE OPTIONS
[PIE CHART]
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<PAGE>
HIGH DIVIDEND PAYOUT RATIOS
PRESENT CONCERNS
[LINE CHART]
DIVIDEND PAYOUT RATIO PERCENT
Historical MidAm Payout Ratios
MIDAMERICAN DIVIDEND AT RISK?
1995 consolidated pro forma dividend payout ratios (109% to 119%, assuming no
synergies)
Potential further rate reduction in current filing (OCA has filed for $100
million reduction)
Possible inability to recover purchase premium in rates (approximately $12
million per year at risk)
Possible divestiture of growth companies to repay debt
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MIDAM IMPLIED VALUE
$26-$30???
We believe they should have...
Included
Discount for time lag and probability of transaction closure
Effect of rate decrease (OCA $100 million?)
Cost of current hostile effort
Full impact of higher debt service
Tax impact on McLeod gains if sold
Goodwill amortization of $12 million per year (For P/E valuation
basis
Excluded
High multiple of 5-6 times operating cash flow - MEC historical multiple doesn't
support - Utilities are primarily valued on P/E basis - Historically WPL has had
higher P/E ratios than MidAm
Cash flows of non-regulated subsidiaries which may be divested
We believe the implied value to MidAm and IES shareholders is much less than
advertised.
MIDAM HURDLES
Potential antitrust issues could block MidAm takeover
To finance the merger MidAm shareowners face either: High debt levels (59
percent based on SEC filed information) Or divestiture of growth businesses
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<PAGE>
THE IEC ADVANTAGE
IEC's cost structure better positions IEC for the competitive
market
Long term growth and diversification
IEC is financially stronger - lower leverage
IEC is further along in regulatory review process
IES Merger/Acquisition history without dividend cuts:
e.g., 1991 Iowa Southern Merger, 1992 Whiting Petroleum Merger and 1992 Union
Electric Asset Acquisition
IEC balanced for shareowners, customers, employees and communities
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