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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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
[ ] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11 (c)
or Rule 14a-12
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):
[X] $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:
[ ] 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:
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PRELIMINARY COPY --SUBJECT TO COMPLETION
[LETTERHEAD OF MIDAMERICAN ENERGY COMPANY]
, 1996
Dear IES Shareholder:
On August 4, 1996, MidAmerican Energy Company proposed a combination
with IES Industries Inc. that would create a strong Iowa-based utility and bring
much greater value to the shareholders, customers and employees of both
companies. In the proposed transaction, IES would merge with MidAmerican or with
a subsidiary of MidAmerican and IES common shareholders would receive, in
exchange for their IES common stock, up to 40% cash and the remainder in
MidAmerican common stock. IES shareholders choosing cash will receive $39.00 per
share and those choosing stock will receive, on a tax-free basis, 2.346 shares
of MidAmerican common stock (with a market value of $39.00 per share based on
the August 2, 1996 closing price of MidAmerican common stock on the New York
Stock Exchange) for each share of IES common stock.
For the reasons set forth in this letter and the accompanying proxy
statement, we believe the proposed MidAmerican 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"). 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.
WE URGE YOU TO VOTE AGAINST THE PROPOSED WISCONSIN TRANSACTION AND
PRESERVE YOUR OPPORTUNITY TO CONSIDER THE HIGHER MARKET VALUE MIDAMERICAN
MERGER. VOTE AGAINST THE WISCONSIN MERGER AGREEMENT BY SIGNING, DATING AND
MAILING THE ENCLOSED BLUE PROXY CARD 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
of Directors to propose a business combination between MidAmerican and IES. IES
responded that its Board of Directors would consider our request. Two weeks
later, however, IES announced that it had entered into an agreement to
participate in the Proposed Wisconsin Transaction which includes terms less
favorable to IES and its shareholders than those we had proposed, including a
notable reduction in your dividend.
WE BELIEVE THE MIDAMERICAN MERGER IS FINANCIALLY SUPERIOR
The MidAmerican Merger is financially superior. Consider the following:
* Greater Value. Based on closing stock prices for Friday, August 2, 1996,
the MidAmerican Merger would provide IES shareholders a 31% premium
above IES's market price as compared to only an 8% premium in the
Wisconsin Transaction. The MidAmerican Merger, therefore, would offer a
21% premium ($6.81 per IES share) above the implied value of the
Proposed Wisconsin Transaction.
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* Substantially Higher Dividend. The MidAmerican Merger would allow IES
shareholders to receive a pro forma dividend of $2.82 per IES share,
a 34% increase above IES' current dividend rate, as compared to the
anticipated pro forma dividend of $1.99 in the Proposed Wisconsin
Transaction which is a 5% reduction below IES' current dividend
rate. The MidAmerican Merger, therefore, would offer a dividend which
is $0.83 per share, or 42% higher, than in the Proposed Wisconsin
Transaction.
* Choice of Cash or Stock. The MidAmerican Merger would allow IES
shareholders a choice of cash or, on a tax-free basis, stock in an
Iowa-based company that we believe will be a stronger and more
competitive total energy provider for Iowa, with an aggressive regional
growth strategy. IES common shareholders electing to receive stock would
receive 2.346 shares of MidAmerican common stock (worth $39.00 per share
based on the closing price of MidAmerican common stock on August 2,
1996) for each IES share.
WE BELIEVE THAT THE MIDAMERICAN MERGER IS FINANCIALLY SUPERIOR TO
THE PROPOSED WISCONSIN TRANSACTION. UNLESS THE PROPOSED WISCONSIN
TRANSACTION IS DEFEATED AT THE IES ANNUAL MEETING, YOU WILL NOT HAVE THE
OPPORTUNITY TO CONSIDER THE MIDAMERICAN MERGER.
THE MIDAMERICAN MERGER WOULD CREATE A STRONGER COMPANY
In addition to the substantial financial benefits to IES shareholders,
we believe that the MidAmerican Merger is better for IES' employees, customers
and the Iowa communities it serves. Among the many advantages of the MidAmerican
Merger would be:
* More than $500 million in cost savings. Based exclusively on public
information relating to IES, we have identified aggregate cost savings
of more than $500 million during the first ten years following
completion of the MidAmerican Merger. Because 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 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 Integration Track Record. The MidAmerican Merger
offers IES shareholders an opportunity to take advantage of MidAmerican
management's proven track record of successfully integrating mergers,
including expeditiously obtaining regulatory approvals, so that
shareholders and customers may promptly realize merger related benefits.
YOUR VOTE IS ESSENTIAL
IF YOU WANT TO HAVE AN OPPORTUNITY TO CONSIDER THE MIDAMERICAN 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.
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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.
Thank you for your consideration and support.
Sincerely,
Russell E. Christiansen Stanley J. Bright
Chairman of the Board President and
Chief Executive Officer
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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. toll free at 1-800-848-2998.
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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 card 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 GREEN proxy card sent
to you by IES.
4. If you have already voted for the proposal on IES' 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 toll free:
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, New York 10005
Call Toll-Free: 1-800-848-2998
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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 __, 1996.
On August 4, 1996, in a letter to IES, MidAmerican proposed a merger of
the two companies that MidAmerican believes constitutes a significantly superior
financial transaction for holders of the IES Shares ("IES Shareholders"), and a
far better transaction for IES' employees, customers and the Iowa communities it
serves, than the Proposed Wisconsin Transaction (as defined below). Under the
MidAmerican proposal, IES would merge with and into MidAmerican or with a
subsidiary of MidAmerican (the "MidAmerican Merger") in a transaction in which
IES Shareholders would receive up to 40% cash and the remainder in shares of
MidAmerican common stock, to be allocated in accordance with customary election
and allocation procedures. IES Shareholders receiving cash would receive $39.00
for each IES Share and IES Shareholders receiving stock would receive 2.346
shares of MidAmerican common stock (with a market value of $39.00 per share
based on the closing price on the New York Stock Exchange on August 2, 1996) for
each IES Share.
At the Annual Meeting, IES Shareholders 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 WPL
("IPC"). 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."
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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.
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 significantly less value
and far lower dividends.
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.
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 MERGER, WHICH MIDAMERICAN BELIEVES
IS FINANCIALLY SUPERIOR TO THE PROPOSED WISCONSIN TRANSACTION.
IF YOU WANT TO HAVE AN OPPORTUNITY TO CONSIDER THE MIDAMERICAN 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. TIME IS OF THE ESSENCE, SO PLEASE ACT TODAY.
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IMPORTANT
TIME IS OF THE ESSENCE
IF YOU WANT THE OPPORTUNITY TO BENEFIT FROM THE MIDAMERICAN 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 MERGER. DO NOT SIGN
ANY GREEN PROXY SENT TO YOU BY IES.
YOU MAY CHANGE YOUR VOTE
IF YOU HAVE ALREADY RETURNED IES' 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.
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INTRODUCTION
On August 4, 1996, MidAmerican Energy Company proposed a merger of IES
Industries Inc. with and into MidAmerican or a subsidiary of MidAmerican in a
transaction in which IES Shareholders would receive up to 40% cash and the
remainder in MidAmerican common stock, to be allocated in accordance with
customary election and allocation procedures. IES Shareholders receiving cash
will receive $39.00 per share and IES Shareholders electing stock will receive
2.346 shares of MidAmerican common stock (with a market value of $39.00 per
share based on the closing price on the New York Stock Exchange on August 2,
1996) for each IES Share. 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 with IES."
In August 1995, the Chief Executive Officers 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 with IES."
Two weeks later, on November 11, 1995, IES announced that it had agreed
to enter into the Proposed Wisconsin Transaction, in which IES, Interstate and
WPL would participate in a three-way business combination. The Proposed
Wisconsin Transaction includes terms less favorable to IES and the IES
Shareholders than both those proposed on October 23, 1995 and those proposed on
August 4, 1996, including a notable reduction in the dividend. MidAmerican
believes the MidAmerican 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 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.
In light of what MidAmerican believes to be the superior benefits of the
MidAmerican Merger, MidAmerican believes that it will be able to obtain the
necessary regulatory approvals for the MidAmerican Merger on a timely basis.
Consequently, MidAmerican believes the Proposed Wisconsin Transaction offers no
significant timing advantage over the MidAmerican Merger.
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Consummation of the Proposed Wisconsin Transaction is subject to the
approval of numerous regulatory agencies, including (among others) the Iowa
Utilities Board (the "IUB"), the Illinois Commerce Commission (the "ICC"), 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.
Regulatory commissions reviewing the MidAmerican Merger or the Proposed
Wisconsin Transaction will be asked to take into account the greater customer
benefits of the MidAmerican Merger when deciding to grant approval. MidAmerican
believes that it will be able to obtain the necessary regulatory approvals for
the MidAmerican Merger by the end of 1997. With the cooperation of IES,
MidAmerican believes that the MidAmerican Merger could be completed within 12
months after execution of a definitive merger agreement with IES.
IES Shareholders would lose the opportunity to take advantage of the
benefits of the MidAmerican 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 Merger,
which MidAmerican 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. We believe they will conclude
that the most favorable transaction is the MidAmerican Merger. There can be no
assurance, however, that the IES Board will act in accordance with the wishes of
the IES Shareholders.
PRESERVE YOUR OPPORTUNITY TO CONSIDER
THE MIDAMERICAN MERGER BY
VOTING AGAINST THE PROPOSED WISCONSIN TRANSACTION
The MidAmerican 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 Merger.
MidAmerican believes that the MidAmerican Merger is financially superior
for the IES Shareholders to either IES remaining independent or IES completing
the Proposed Wisconsin Transaction. Advantages of the MidAmerican Merger
include, among others:
* Greater Value. Based on closing stock prices for Friday, August 2,
1996, the MidAmerican Merger would provide IES Shareholders with a 31%
premium above IES' market price as compared to only an 8% premium in
the Proposed Wisconsin Transaction. The MidAmerican Merger, therefore,
would offer a 21% premium ($6.81 per IES Share) above the implied
value of the Proposed Wisconsin Transaction.
* Substantially Higher Dividend. The MidAmerican Merger would allow IES
Shareholders to receive a pro forma dividend of $2.82 per IES Share, a
34% increase above IES' current dividend rate, as compared to the
anticipated pro forma dividend of $1.99 in the Proposed Wisconsin
Transaction which is a 5% reduction -10-
<PAGE>
below IES' current dividend rate. The MidAmerican Merger, therefore,
would offer a dividend which is $0.83 per share, or 42% higher, than in
the Proposed Wisconsin Transaction.
* Choice of Cash or Stock. The MidAmerican 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. IES Shareholders electing to receive stock would
receive 2.346 shares of MidAmerican common stock (worth $39.00 per share
based on the closing price of MidAmerican common stock on August 2,
1996) for each IES Share.
* More than $500 million in cost savings. Based exclusively on public
information relating to IES, we have identified aggregate cost savings
of more than $500 million during the first ten years following
completion of the MidAmerican Merger. Because 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
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 Integration Track Record. The MidAmerican Merger
offers IES Shareholders an opportunity to take advantage of MidAmerican
management's proven track record of successfully integrating 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
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 Merger and will move all IES Shareholders closer to
being able to benefit from the MidAmerican Merger.
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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 GREEN proxy card sent to you by IES. If you
have already returned a 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.
By taking these steps, you will give the IES Board a clear message that
they should take all necessary steps to remove all obstacles to the MidAmerican
Merger, which MidAmerican believes is financially superior to the Proposed
Wisconsin Transaction.
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BACKGROUND OF THE SOLICITATION
Prior Communications with 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, and explaining the synergies of
such a combination, describing the opportunity to create a strong Iowa-based
utility which would continue to have a major impact on the economy of Iowa. In
the October 3 letter, Messrs. Christiansen and Bright indicated that based on a
brief analysis, a preliminary estimate of potential savings to be achieved in a
combination of MidAmerican and IES would exceed $500 million. 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
merger. 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 Utilities Holding Company Act
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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.
The August 4 Offer and Related Actions
On August 4, 1996, MidAmerican delivered to Mr. Liu a letter setting
forth MidAmerican's proposal that IES and MidAmerican effect the MidAmerican
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 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 6, 1996, MidAmerican filed this Proxy Statement with the
Securities and Exchange Commission for use in soliciting proxies from IES
Shareholders against the approval and adoption of the Wisconsin Merger Agreement
and the Proposed Wisconsin Transaction.
The Wisconsin Merger Agreement
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 Iowa law, and other than IES
Shares owned by WPL, IES or IPC 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 Delaware
law) will remain outstanding. Unless regulatory requirements require the
foregoing transactions to be consummated pursuant to the alternative structure
described below, such transactions will be effected in the manner described
above. The Wisconsin Merger Agreement provides, however, 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, the transactions
will be consummated in a manner designed to comply with such regulatory
requirements. In that event, the (i) IES Merger will be effected as described
above and (ii) IES Utilities,
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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. 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. 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. If the Utilities Reincorporation Merger is not effected, the Utilities
preferred stock will remain outstanding and unchanged as a result of the
transactions described herein. In addition, the merger involving Interstate will
be reconstituted to provide for (i) the merger of IPC with and into New
Interstate Power Company, a Wisconsin corporation ("New IPC"), pursuant to which
(a) each outstanding share of IPC common stock (other than shares owned by WPL,
IES or IPC or any of their respective subsidiaries, which shares will be
cancelled) will be converted into one share of common stock of New IPC and (b)
each outstanding share of IPC preferred stock (other than dissenting shares)
will be converted into one share of preferred stock of New IPC with terms and
designations under New IPC's Restated Articles of Incorporation substantially
identical to those of IPC's preferred stock under IPC's Restated Certificate of
Incorporation, including certain additional voting rights proposed to be
approved at IPC's annual meeting of shareholders; and (ii) the merger of
Acquisition with and into New IPC, which merger will result in New IPC becoming
a subsidiary of Interstate Energy, pursuant to which (a) each outstanding share
of New IPC 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 IPC preferred stock (other than dissenting shares) will
remain outstanding.
The Proposed Wisconsin Transaction is subject to certain conditions
including, among others, a condition that all regulatory and shareholder
approvals be obtained.
The Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after approval by the shareholders of WPL, IES and
Interstate, in various circumstances, including: (a) by any party thereto, if
the IES Shareholders do not approve the Proposed Wisconsin Transaction at the
Annual Meeting; (b) by any party thereto, by written notice to the other
parties, if the Proposed Wisconsin Transaction shall not have been consummated
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 of the Proposed Wisconsin Transaction to occur on or before that date; (c)
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 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
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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 ancillary transactions, (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
clause (A), (B), or (C).
The Wisconsin Merger Agreement provides that if the Wisconsin Merger
Agreement is terminated by WPL and/or Interstate for breaches of any
representations or warranties of IES 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 (c)(i) and
(c)(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 by IES, 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 IES' willful breach, there shall have been a
third-party tender offer or proposal for a Business Combination (as defined in
the Wisconsin Merger Agreement) 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 IES, 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.
Additionally, the Merger Agreement would require payment of an aggregate
termination fee of $25,000,000, together with reimbursement of out-of-pocket
expenses, by IES to the other parties in the following circumstances: (1) the
Merger Agreement is terminated (x) as a result of the acceptance by the IES of a
third-party tender offer or proposal for a Business Combination, (y) following a
failure of the IES Shareholders to grant their approval to the Proposed
Wisconsin Transaction or (z) as a result of IES' material failure to convene the
Annual Meeting, distribute proxy materials and, subject to the IES Board's
fiduciary duties, recommend the Proposed Wisconsin Transaction to the IES
Shareholders; (2) at the time of such termination or prior to the Annual Meeting
there has been a third-party tender offer or proposal for a Business Combination
which shall not have been rejected by IES or withdrawn by such third party; and
(3) within two and one-half years of any such termination described in clause
(1) above, IES 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.
In addition to the foregoing, if the Wisconsin Merger Agreement is
terminated under circumstances that give rise to the payment of a termination
fee by Interstate or WPL and within nine months of such termination IES is
acquired by the same third-party offeror which acquired the party which paid the
first termination fee, the sole remaining party will be entitled to an
additional termination payment by IES of $25,000,000.
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")
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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.
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 immediately 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 IES under the foregoing provisions plus the aggregate amount which could be
payable by IES under the Stock Option Agreements may not exceed $40,000,000.
COMPARISON OF THE PROPOSALS
MidAmerican Merger Premium and Dividend Impact
MidAmerican believes that the MidAmerican Merger is financially superior
to the Proposed Wisconsin Transaction. The closing price per IES Share on August
2, 1996 (the last trading day prior to the public announcement of the August 4
offer) was $29.75. The MidAmerican Merger would provide a substantial premium to
IES Shareholders in relation to that level, as shown by the following table:
MidAmerican IES
Merger Share Percent
Price Price Differential*
August 2, 1996 (last trading day
before public announcement
of the August 4 offer)......... $39.90 $29.75 31%
August _, 1996 (last trading day
prior to the date of this
Proxy Statement)............... $ $ %
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* Based on the closing price of MidAmerican Common Stock and the IES
Shares on the indicated dates. The MidAmerican Merger Price is
calculated based upon a shareholder receiving 40% cash ($15.60 per
share) and the remainder of MidAmerican common stock (1.4076 shares of
MidAmerican common stock).
The MidAmerican Merger would also provide a substantial premium to IES
Shareholders in relation to the Proposed Wisconsin Transaction, as shown by the
following table:
MidAmerican Wisconsin
Merger Transaction Percent
Price Price Differential*
August 2, 1996 (last trading day
before public announcement of the
August 4 offer)............ $39.00 $32.19 21%
August _, 1996 (last trading day
prior to the date of this
Proxy Statement)........... $ $ %
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* Based on the closing price of MidAmerican Common Stock, the IES Shares
and the Common Stock of WPL on the indicated dates.
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In Addition, the MidAmerican Merger would provide an immediate dividend
increase to IES Shareholders as shown by the following table:
Current New
IES IES Percent
Dividend Dividend Differential Differential
MidAmerican Merger..... $2.10 $2.82* $ 0.72 34%
Wisconsin Transaction.. $2.10 $1.99** $(0.11) (5)%
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* Based on the current annual dividend rate of $1.20 per share of
MidAmerican common stock. 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 Merger.
** Assumes IPC adopts WPL's current dividend policy.
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.
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 projected. Such judgments, assumptions and uncertainties are
discussed more fully below.
MidAmerican believes that the IES Shareholders, as well as IES'
customers, employees and the communities it serves, would realize substantial
benefits from the MidAmerican 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 all 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
1,233 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 as the demands of a competitive market
intensify, and to reduce exposure to changes in economic
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conditions in any given segment of the business. 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. This integration of products and services
would position 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 pursue parallel paths with respect to potential
customers or industry groups, which would enhance the ability of the
combined MidAmerican/IES to attract or to retain within Iowa such
potential customers or industry groups.
MidAmerican believes that available synergies will generate cost savings
in excess of $500 million to the combined MidAmerican/IES over a ten-year
period. Such cost savings are projected to begin in 1998 and increase each year
thereafter. Such estimates are based on a review of publicly available
information performed by MidAmerican. The major components of the anticipated
cost savings are as follows:
Generation
* Integration of dispatching and electric production operations--The
combined MidAmerican/IES could obtain fuel savings from joint dispatch
of generating capacity that is not available when the two companies
are operated as two separate systems. Fuel savings would result from
an improved ability to schedule and commit each of the base,
intermediate and peak load facilities of the combined MidAmerican/IES
in a more economically efficient manner.
* Avoidance or deferral of future capital expenditures--The combined
MidAmerican/IES would have the ability to reduce future expenditures
for generating capacity by coordinating and optimizing planning for
future resources. The combination of the two companies would result in
system diversity due to differences in the mix of generating capacity
currently installed on each company's system, the electrical loads
placed on each system and the timing of peak demands. The uncommitted
generating capacity created by such system diversity will result
in the delay, elimination or substitution of additional capacity
now planned by the two stand-alone companies.
* 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 consolidate 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 enables customer service functions such as
service initiation and service scheduling to be combined. The close
proximity of the two companies would enable work to be reconfigured
and resources to be shared in operations areas.
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* Integration of field and technical support functions--The combined
MidAmerican/IES would be able to eliminate redundant functions in the
area of distribution support, such as engineering, construction,
operation and maintenance.
Purchasing Economies
* Streamlining of inventories and purchasing economies--The combined
MidAmerican/IES would achieve savings through the centralization of
purchasing and inventory functions related to construction, operation
and maintenance at generating plants, service centers, warehouses and
headquarters. The larger size of the Company should improve its
bargaining position in its purchases of fuel, gas supplies, materials,
services and equipment, and thus result in lower unit costs for such
items.
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 operational and
capital expenditures in the area of management information systems
that would be made by each company on a stand-alone basis. These
avoided expenditures relate to operating systems, such as the customer
information and geographic information systems, that would not be
wholly duplicated in the combined company. 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 experience from the
previous merger of Midwest Resources and Iowa-Illinois, in which total
payroll costs were significantly reduced and its knowledge of IES,
MidAmerican believes that substantial payroll cost reductions can be
achieved by employing a combination of attrition, controlled hiring,
retraining, early retirements, voluntary separation, other payroll
reduction measures (if necessary) and better management programs, such
as activity standardization and technology substitution. 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
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savings estimates for the MidAmerican Merger contemplate a
reduction of approximately 450 positions.
While data concerning the estimated cost savings from the Proposed
Wisconsin Transaction set forth in the Joint Proxy Statement/Prospectus of IES,
Interstate and WPL dated July 11, 1996 (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. Nonetheless,
MidAmerican believes that upon inspection of similar data and discussions with
IES personnel, additional cost savings opportunities 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
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 Merger: (i) the savings
period is 1998 through 2007; (ii) initial savings of approximately $25 million,
increasing annually throughout the savings period; (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 and IES' planned actions, to the extent disclosed; (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 Merger.
The Regulatory Plan is expected to reflect MidAmerican's current electric
pricing targets for average class prices by June 1, 2001. The average price
targets (including fuel) are 8.54 cents per kilowatt hour for residential
customers, 6.92 cents per kilowatt hour for commercial customers and 4.26 cents
per kilowatt hour for industries customers. There can be no assurance that the
Regulatory Plan will be implemented as described herein. 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.
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MidAmerican believes that it will be able to obtain the necessary
regulatory approvals for the MidAmerican Merger on a timely basis and in a time
frame at least as favorable as that in which IES, Interstate and WPL would be
able to obtain the necessary approvals for the Proposed Wisconsin Transaction.
With the cooperation of IES, MidAmerican believes that the MidAmerican Merger
could be completed within 12 months from the date of execution of a definitive
merger agreement.
Regulatory Approvals
Regulatory commissions reviewing the MidAmerican Merger and the Proposed
Wisconsin Transaction will be asked to take into account the greater customer
benefits of the MidAmerican Merger when deciding between the applications for
approval.
The consummation of the MidAmerican Merger and the Proposed Wisconsin
Transaction both would be subject to approval of the IUB, the ICC, the NRC and
the FERC, the expiration or termination of the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 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 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 Merger and the
benefits of the Regulatory Plan described above, MidAmerican believes that it
will be able to obtain the necessary regulatory approvals for the Merger on a
timely basis and in a time frame at least as favorable as that in which IES,
Interstate and WPL would be able to obtain the necessary regulatory approvals
for the Proposed Wisconsin Transaction. Accordingly, MidAmerican believes that
the proposed Wisconsin Transaction offers no timing advantage over the
MidAmerican Merger.
Material Contracts Between MidAmerican and IES
MidAmerican and Utilities, a wholly owned subsidiary of IES, owns as
tenants in common interests in the George Neal Generating Station Unit No. 3
(MidAmerican: 72% pr 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 are common owners of the George Neal
Generating Station 345 kilovolt transmission line. Also, each own 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.
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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 the Company's service territory.
The Company 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. The Company 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, the Company had 635,000
retail electric customers and 601,000 natural gas customers.
The Company 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 the Company'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 the
Company 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, the Company 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 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 is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission. Reports, proxy
statements and other information filed by MidAmerican with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the public reference facilities in the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of information may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. MidAmerican's common stock and preferred stock is listed and traded on
the NYSE. Reports, proxy statements
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and other information filed by MidAmerican and IES with the Commission may
be inspected at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
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.
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VOTING OF PROXY CARDS
General
Only IES Shareholders of record on July 10, 1996 are eligible to vote.
Therefore, any IES Shareholder owning Shares held in the name of a brokerage
firm, bank, or other institution should sign, date and return 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.
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 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 person 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
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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 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 and against approval of the nominees for
director. 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 and
against the nominees for director.
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 MERGER, WHICH MIDAMERICAN
BELIEVES IS FINANCIALLY SUPERIOR TO THE PROPOSED WISCONSIN TRANSACTION.
IF YOU WANT TO HAVE AN OPPORTUNITY TO CONSIDER THE MIDAMERICAN MERGER,
VOTE AGAINST THE APPROVAL AND ADOPTION OF THE WISCONSIN MERGER AGREEMENT AND THE
PROPOSED WISCONSIN TRANSACTION BY SIGNING, DATING AND RETURNING THE ENCLOSED
BLUE PROXY CARD TODAY.
Approval of IES/Interstate/WPL Joint Proxy Statement/Prospectuss 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 "Other 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 Other Proposal.
The accompanying BLUE proxy card will be voted in accordance with your
instructions on such card. You may vote for approval of the Other Proposal or
vote against, or abstain from voting on, the approval of the IES/Interstate/WPL
Joint Proxy Statement/Prospectus 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 OTHER PROPOSAL.
Other Proposals
EXCEPT AS SET FORTH ABOVE, MIDAMERICAN IS NOT AWARE OF ANY PROPOSALS TO
BE BROUGHT BEFORE THE ANNUAL MEETING. SHOULD OTHER PROPOSALS BE BROUGHT BEFORE
THE ANNUAL MEETING, THE PERSONS NAMED ON THE BLUE PROXY CARD WILL ABSTAIN FROM
VOTING ON SUCH PROPOSALS UNLESS SUCH PROPOSALS ADVERSELY AFFECT THE INTERESTS OF
MIDAMERICAN AS DETERMINED BY MIDAMERICAN IN ITS SOLE DISCRETION, IN WHICH EVENT
SUCH PERSONS WILL VOTE ON SUCH PROPOSALS AT THEIR DISCRETION.
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<PAGE>
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.
A shareholder may dissent as to less than all of the shares of capital
stock registered in the name of such shareholder only if such shareholder
dissents with respect to all shares beneficially owned by any one person and
notifies IES in writing of the name and address of each person whose behalf such
shareholder asserts dissenters' rights. The rights of a partial dissenter are
determined as if the shares of capital stock as to which the shareholder
dissents and such shareholder's other shares of capital stock were registered in
the names of different shareholders. A beneficial shareholder may assert
dissenters' rights as to shares held on such shareholder's behalf only if such
shareholder (i) submits to IES the record shareholder's written consent to the
dissent not later than the time the beneficial shareholder asserts dissenters'
rights and (ii) asserts dissenters' rights with respect to all shares of capital
stock of which the shareholder is the beneficial shareholder or over which such
beneficial 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 shareholder's intent to demand payment for shares of common stock if the
Proposed Wisconsin Transaction is consummated and (ii) not vote such shares of
capital stock in favor of the Mergers. Any such notice by IES Shareholders must
be received by IES at IES Tower, 200 First Street S.E., Cedar Rapids, Iowa
52401, Attention: 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 a 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 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 its shareholders, IES must deliver a written dissenters' notice
to all of its 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 shareholder asserting
dissenters' rights certify whether or not such shareholder acquired beneficial
ownership of the 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 shareholder acquired beneficial ownership of the shares before the
date set forth in the dissenters' notice and deposit the certificate
representing the 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.
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<PAGE>
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 shareholder that has complied with the provisions of the
IBCA the amount estimated to be the fair value of the dissenter's 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 capital 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 shareholder unless the dissenting shareholder was the beneficial
owner of the 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 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 shareholder who agrees to accept it in full
satisfaction of the dissenter's demand.
According to the IES/Interstate/WPL Joint Proxy Statement/Prospectus,
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 shareholder's own estimate of the fair value of
the shares and the amount of interest due, and demand payment of the fair value
of such shares and interest so calculated less payments received by such
dissenting 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 shares. If 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 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 represented in person or by
proxy at the Annual Meeting entitled to vote thereon is required for approval of
the Wisconsin Merger Agreement and the Proposed Wisconsin Transaction, and (iv)
the
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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.
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.
For information relating to the ownership of IES Shares by each person
known to own 5% or more of the outstanding IES Shares and by the current
directors and executive officers of IES, see Annex C hereto.
The information concerning IES and the Proposed Wisconsin Transaction
contained in this Proxy Statement (including Annex C hereto) has been taken from
or is based upon documents and records on file with the Securities and Exchange
Commission and other publicly available information. MidAmerican has no
knowledge that would indicate that statements relating to IES contained in this
Preliminary 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.
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 has retained D.F. King & Co.,
Inc. ("D.F. King") to assist and to provide advisory and proxy solicitation
services in connection with this Proxy Solicitation for which D.F. King will be
paid a customary fee of not more than $_______ 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
and Georgeson 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 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 Merger. Under the Letter Agreement, MidAmerican has agreed to pay
Dillon Read for its financial advisory services in connection with the proposed
MidAmerican Merger a financial advisory fee of
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(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 this 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.
MIDAMERICAN ENERGY COMPANY
August __, 1996
If you have any questions or need assistance in voting your shares, please
call D. F. King at the telephone number listed below:
D.F. KING & CO., INC.
77 Water Street, 20th Floor
New York, New York 10005
Call Toll-Free: 1-800-848-2998
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<PAGE>
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
Present Position with MidAmerican or Other
Name and Business Address Principal Occupation or Employment
- ------------------------- ------------------------------------------
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
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
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
A-1
<PAGE>
Present Position with MidAmerican or Other
Name and Business Address Principal Occupation or Employment
- ------------------------- ------------------------------------------
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
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, Private Practice
Swartz,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.
IPB Avenue
P.O. Box 515
Dakota City, NE 68731
Nancy L. Seifert Director, MidAmerican, Executive Vice President,
James F. Siefert & James Siefert & Sons, L.L.C.
Sons, L.L.C.
300 Law Building
225 2nd St., SE
Cedar Rapids, IA 52401-1400
A-2
<PAGE>
Present Position with MidAmerican or Other
Name and Business Address Principal Occupation or Employment
- ------------------------- --------------------------------------------
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
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
A-3
<PAGE>
Other Representatives of MidAmerican Who May Solicit Proxies
Name and Business Address
(Unless otherwise indicated,
the business address is
MidAmerican Energy Company,
666 Grand Avenue, Present Position with MidAmerican or Other
Des Moines, Iowa 50303) Principal Occupation or Employment
- ----------------------- ------------------------------------------
Paul J. Leighton Vice President and Corporate Secretary
Keith D. Hartje Manager Corporate Communications
J. Sue Rozema Vice President Investor Relations
Larry M. Smith Controller
Alan L. Wells Manager Corporate Development & Strategy
Jack L. Alexander Vice President & Chief Information Officer
Dave J. Levy Vice President & Chief Information Officer
Charlene A. Osier Manger 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
Jim C. Galt Manager Financial Planning
Rick T. Tunning Manager Corporate Accounting
John P. Palmolea Senior Accountant
Merlyn F. Wiese Senior Financial Analyst
Jim C. Parker Senior Bulk Power Engineer
Jim J. Howard Vice President Gas Administrative Services
Pat A. Kirchner Attorney
Maureen E. Sammon Manger Benefits
Dave C. Caris Manager Governmental Affairs
Garry W. Osborn Strategic Planner
George L. Phillips Manager Corporate Performance
Tom C. Watt Manager Waterloo District
Ginger A. Dasso Manager Mississippi Valley
Greg B. Elden Manager Siouxland District
Robert L. Lester Manger Des Moines District
Les A. Juon Manager Sioux City District
John A. Harvey Manager Distribution Operations Support
Annette J. Johnston Manager Customer Support
Chris M. Swanson Manager Cedar Valley District
Ron E. Unser Manager Quad Cities District
Jeanette I. Lose Manager Credit
Barb J. Anderson Executive Assistant
Bill G. Stowe Manager Electric Operations
David L. Graham Manager Electric Energy Services
Jim E. Wilson Manger Regulatory Affairs
Chuck H. Golliher Manager Purchasing
<PAGE>
Name and Business Address
(Unless otherwise indicated,
the business address is
MidAmerican Energy Company,
666 Grand Avenue, Present Position with MidAmerican or Other
Des Moines, Iowa 50303) Principal Occupation or Employment
- ---------------------------- -------------------------------------------
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
Tim D. Grabinsky Regional Communications
Jodi E. Bacon Manager HR Communications
Suzan M. Stewart Manager Attorney Gas Law Department
Chuck R. Montgomery Senior Attorney
Steve R. Weiss Senior Attorney
Terry R. Fox Attorney
J. Chris Cook Attorney
Barb A. Pollastrini Employee Communications
Karen P. Johnson Communications Specialist
Mary C. nelson Labor Relations Attorney
Janet H. Trentmann Corporate HR Consultant
Tom J. Sweeney Supervisor Employment & Development
Gary W. Richardson Manger Electric Operations
John J. Cappello Vice President Marketing
Dillon, Read & Co. Inc.
Ken Crews Managing Director
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite 3950
Dallas, Texas 75201
James Hunt Managing Director
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite 3950
Dallas, Texas 75201
Jeff Miller Vice President
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite 3950
Dallas, Texas 75201
Jason Sweet Managing Director
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite 3950
Dallas, Texas 75201
A-5
<PAGE>
Name and Business Address
(Unless otherwise indicated,
the business address is
MidAmerican Energy Company,
666 Grand Avenue,Present Position with MidAmerican or Other
D0es Moines, Iowa 50303) Principal Occupation or Employment
- ---------------------------- ------------------------------------------
Forrest Williams Analyst
Dillon, Read & Co. Inc.
2001 Ross Avenue, Suite 3950
Dallas, Texas 75201
Jim Brandi Managing Director
Dillon, Read & Co. Inc.
535 Madison Avenue
New York, NY 10022
Eliot Merrill Analyst
Dillon, Read & Co. Inc.
535 Madison Avenue
New York, NY 10022
A-6
<PAGE>
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 Preliminary Proxy Statement, MidAmerican has no
security holdings in IES. Regina Rae Huggins, a person who will solicit proxies,
is the beneficial owner of four (4) IES Shares. John W. Colloton's wife is the
beneficial owner of 250 IES Shares with respect to which Mr. Colloton disclaims
any beneficial ownership. Leonard L. Woodruff is the beneficial owner of 100 IES
Shares. Jackie A. Fulhart owns 305 IES Shares. Chris M. Swanson's wife owns 12
IES Shares.
Other than as set forth above, as of the date of this Preliminary 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 Paul A. Bjork, Marv E. Kingery, Ginger
A. Dasso, Bob L. Lester, Chuck H. Golliher, Sally A. Robinson, Kim K. Koster,
Chuck R. Montgomery, Steve R. Weiss, or John J. Cappello. MidAmerican disclaims
beneficial ownership of any securities of IES held by any pension plan of
MidAmerican or by any affiliate of MidAmerican.
Dillon Read & Co. Inc. ("Dillon Read"), financial advisors to
MidAmerican, does not admit that it or any of its directors, officers, employees
or affiliates are a "participant," as defined in Schedule 14A under the Exchange
Act, or that such Schedule 14A requires the disclosure of certain information
concerning Dillon Read, Ken Crews, James Hunt, Jeff Miller, Jason Sweet, Forest
Williams, Jim Brandi, and Elliot Merrill, in each case of Dillon Read, who may
assist MidAmerican in such a solicitation. 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 its own account and the
account of its 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-1
<PAGE>
ANNEX C
SHARES HELD BY DIRECTORS AND EXECUTIVE OFFICERS OF IES
The following table sets forth, as of June 1, 1996, the number of 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.
Amount and Nature Percent
Name of Beneficial Owner of Beneficial Ownership(1) of Class
------------------------ -------------------------- --------
WPLH.............................. 5,861,115 16.4%
IPC............................... 5,861,115 16.4%
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(1) By reason of the Stock Option Agreements, each of Interstate and WPL may
be deemed to have sole voting and dispositive ower with respect to the
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 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 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.
Amount of Nature Percent
Name of Beneficial Owner of Beneficial Ownership(1) of Class
------------------------ -------------------------- --------
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 Excutive Officers and Directors
of IES and Utilities as a
group (20 persons)............... 168,556 .56%
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(1) Includes ownership of shares by family members even though beneficial
ownership of such shares may be diclaimed.
(2) Less than .01% of the Class (IES Common Stock).
C-1
<PAGE>
FORM OF PROXY CARD
- --------------------------------------------------------------------------------
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 and
adoption of the Agreement and Plan of Merger, dated as of November 10, 1995, as
amended (the "Wisconsin 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 WPL, 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. 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 AND ADOPTION OF THE WISCONSIN MERGER AGREEMENT AND THE PROPOSED
WISCONSIN TRANSACTION. IF RETURNED CARDS ARE SIGNED BUT NOT MARKED, THE
UNDERSIGNED WILL BE DEEMED TO HAVE VOTED AGAINST APPROVAL AND ADOPTION OF THE
WISCONSIN MERGER AGREEMENT AND THE PROPOSED WISCONSIN TRANSACTION AND TO HAVE
ABSTAINED ON ALL OTHER MATTERS.
- --------------------------------------------------------------------------------
C-2
<PAGE>
REVERSE OF PROXY CARD
- --------------------------------------------------------------------------------
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 [ ]
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.
IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE, PLEASE CONTACT D.F. KING & CO.,
INC. AT 1-800-848-2998
- --------------------------------------------------------------------------------
C-3
<PAGE>
