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] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
IES INDUSTRIES INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(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 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
[ ] 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 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:
$453,367
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
PRELIMINARY PROXY MATERIALS of WPL HOLDINGS, INC., IES INDUSTRIES INC.
and INTERSTATE POWER COMPANY and JOINT PROXY STATEMENT of WPL HOLDINGS,
INC., IES INDUSTRIES INC. and INTERSTATE POWER COMPANY AND PROSPECTUS
of WPL HOLDINGS, INC. and INTERSTATE POWER COMPANY, ALL ON FORM S-4
FILE NO. 333-07931
- -------------------------------------------------------------------------------
(3) Filing Party:
IES INDUSTRIES INC, WPL HOLDINGS, INC and INTERSTATE POWER COMPANY
- -------------------------------------------------------------------------------
(4) Date Filed:
JANUARY 18, 1996 and JULY 11, 1996
- -------------------------------------------------------------------------------
<PAGE>
SCRIPT FOR ANALYST COMMUNITY CONFERENCE CALL
LEE LIU
Thank you operator. Good morning, everyone. Thank you for joining us today. I'm
Lee Liu, Chairman, Chief Executive Officer and President of IES Industries. With
me here today in Cedar Rapids are Erroll Davis, President and Chief Executive
Officer of WPL Holdings, and Mike Chase, Executive Vice President of Interstate
Power Company.
We'll keep our remarks this morning brief so that we can devote most of our time
to answering any questions you may have.
I assume by now that you have all seen our press release this morning and
therefore know that all three companies have agreed to revised terms to the
merger agreement that will form Interstate Energy.
Under the revised terms, each share of IES common stock will be converted into
1.14 shares of Interstate Energy common stock. Based on the price of WPLH common
stock as of the close of market Thursday, August 15, 1996, each share of IES
common stock is valued at $36.20 per share under the new terms. This is an
increase of approximately $4 per share, or about $123 million of additional
value for IES shareholders. In addition, it is anticipated that, based on WPLH's
current dividend rate, IES shareholders of common stock will receive an initial
annual cash dividend from Interstate Energy of at least $2.25 for each IES share
now held.
1
<PAGE>
Under the revised terms, IES shareholders will now own about 45% of Interstate
Energy, up from approximately 42% under the previous terms. Under the new terms,
WPLH shareholders will own approximately 41% and Interstate shareholders will
own approximately 14%.
As part of our analysis of the MidAmerican proposal and our decision to recommit
to the Interstate Energy transaction, we looked again at strategic fit. In the
3-way transaction, we have an excellent strategic fit. We have three companies
with shared strategic visions and low-cost operating strategies. Importantly,
Interstate Energy will be a powerful regional company in the emerging dynamic
new environment of energy generation and distribution. The ability to market
electricity from our efficient, low-cost power plants to attractive
higher-growth areas in neighboring states--and the financial resources to pursue
these opportunities--will catapult Interstate Energy into new markets.
In Interstate Energy, three strong companies are coming together. We will be
stronger competitively because we will be a lower cost power producer, and we
will be stronger financially based on the credit rating of the three companies.
We have strong growth prospects, which provide a basis for an expectation of
increased dividends in the future.
2
<PAGE>
At the same time, Interstate Energy will have a significant positive impact on
Iowa. It will be 60% Iowa owned. Both the Energy Delivery headquarters and the
unregulated business units will be in Cedar Rapids. This will significantly
increase the business activities in Iowa communities.
IES has committed to a 3-year rate freeze throughout Iowa, so our customers here
are protected from sudden increases. MidAmerican is in the midst of a rate case
as a stand-alone business. Importantly, the Office of Consumer Advocate in Iowa
has filed a petition against MidAmerican's rate proposal and is seeking a
reduction in MidAmerican's current rates by $100 million.
The combination of our three companies results in a business with a stronger
balance sheet. In our transaction there is no need to liquidate assets to
finance the merger.
This is an appropriate point from which to begin an analysis of the MidAmerican
proposal and the reasons why the IES Board unanimously rejected it.
While MidAmerican has publicly represented that its transaction is worth $39 per
share, we think its real value is substantially less. To pay for their deal,
they may significantly increase leverage. If the cash portion of their deal is
fully exercised, MidAmerican would have $500 million of additional cash
requirements--$500 million of new debt. The have indicated that they would be
selling off significant assets to pay down this debt.
3
<PAGE>
Several other elements make us discount the purported MidAmerican value
significantly.
First, we look at the recent performance of MidAmerican stock.
Then, we can look at the tax consequences for most of our shareholders who might
exercise the cash option of their offer.
Then we can look at the fact that even with the most rapid regulatory approval
process for the MidAmerican transaction--a scenario we think unlikely--the
MidAmerican transaction could take substantially longer to complete than the
Interstate Energy transaction. We have made significant progress on the way to
regulatory approval of our transaction.
Taken together, these facts lead us to believe their transaction has a value
significantly below the $39 per share value they advertise.
Another element contributing to a discount in value of the MidAmerican deal: In
a previous MidAmerican transaction, shareholders were disappointed that
MidAmerican's dividend had to be cut subsequent to completion of the
transaction. Given the amount
4
<PAGE>
of additional debt MidAmerican may incur in this transaction--and its track
record--we question MidAmerican's ability to sustain its dividend under the
proposed deal structure.
An important component of the increased value recognized in the improved terms
of the Interstate Energy merger is the continuing increase in the value of our
investment in McLoed, the highly successful, growing provider of telephony
services in the upper Midwest region, and the outlook for that company. Our
initial investment of approximately $10 million is now worth approximately $275
million. We observe with interest an analyst report from Salomon Brothers
published July 19th included a "buy" rating with a 12-month target price of $40
per share. While no one here will be foolish enough to project what the market
will do, if that came to pass, based on our 10 million share position in McLoed,
that would represent an additional $140 million gain for IES.
As for synergies, we have projected synergy cost savings, based on what we are
comfortable are very conservative projections, of $749 million over a ten-year
period. Over the same period, MidAmerican projects $500 million in cost savings.
Frankly, we believe MidAmerican has taken an extremely aggressive approach in
calculating that synergy value. We're skeptical of their approach. We believe
the synergy value they project is too high.
5
<PAGE>
It's important to keep in mind, too, in looking at synergy values, that in the
Interstate. Energy transaction, IES shareholders and customers will have a
participation in approximately 45% of $749 million in cost savings. In the
MidAmerican deal, on the other hand, if you assume full exercise of the cash
option, IES shareholders and customers would have a participation of only 29% of
$500 million in cost savings.
Before concluding let me say that in addition to the compelling strategic fit,
there is a good cultural fit among the three companies. Transition teams from
the three companies already have a considerable head start in planning for the
integration of operations.
In sum, we have a merger that is a win-win-win. There is attractive immediate
and long-term value for shareholders, there are significant benefits for the
entire region, and the transaction is nearly completed. The MidAmerican proposal
is simply inferior in all respects.
And now let me turn it over to Erroll Davis, who will become President and Chief
Executive Officer of Interstate Energy.
ERROLL DAVIS Thank you, Lee.
6
<PAGE>
There is an inexorable trend in the utility industry toward strategic
combinations which will create opportunities for expanded marketing of energy
products and services. There is also a growing tendency to see a blurring of
state boundaries as regional economies take shape.
We see this as a new age of opportunity in which Interstate Energy can both grow
itself and contribute significantly to overall regional growth. The value of
this transaction for our shareowners, our customers and our employees is even
stronger now than when we announced the merger nine months ago. This is
reflected in the new exchange ratio.
Lee Liu, Wayne Stoppelmoor and I are committed to preserving this exciting
opportunity for the benefit of all of our respective shareholders. I know my
vision of the future and Lee's vision of the future is shared by our colleagues
at Interstate Power.
Let me turn it over to Mike.
MIKE CHASE
Thanks, Erroll. Iowa has a long tradition of embracing new markets for the
products and services of our highly educated and motivated citizenry. The notion
of some sort of fortress Iowa, as MidAmerican has trumpeted, is just plain wrong
for the operating environment facing us today--and tomorrow.
7
<PAGE>
When we export our products to other states and countries, we enhance our
economic position and create good jobs at home. Iowans and Iowa regulators
understand this fact and, we believe, will see our vision as forward looking and
our transaction as superior. We are eager to move forward to complete this
transaction.
Lee?
LEE LIU
Thank you Erroll and Wayne. And now, we'd be happy to respond to your questions.
Operator?
Q&A
**************************
I want to thank everyone for joining us today. We look forward to speaking with
you more over the coming weeks about the compelling merits of this transaction.
Good-bye.
[RESERVE ANY FURTHER COMMENTS UNTIL YOU ARE CERTAIN THE CALL HAS DISCONNECTED]
8
<PAGE>
