- --------------------------------------------------------------------------------
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 1996
REGISTRATION NO. 333-10405
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
PRE-EFFECTIVE
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
MIDAMERICAN ENERGY COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
IOWA 4924 42-1425214
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION
NUMBER)
</TABLE>
666 GRAND AVENUE
P.O. BOX 657
DES MOINES, IA 50303-0657
(515) 242-4300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
PHILIP G. LINDNER
GROUP VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
MIDAMERICAN ENERGY COMPANY
666 GRAND AVENUE
P.O. BOX 657
DES MOINES, IA 50303-0657
(515) 242-4300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------------------
Copies to:
DAVID M. KIES
JOSEPH B. FRUMKIN
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON
AS PRACTICABLE AFTER THE CONSUMMATION OF THE BUSINESS COMBINATION TRANSACTION
DESCRIBED HEREIN.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
-------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------
PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
TITLE OF EACH CLASS PRICE PER AGGREGATE
OF SECURITIES TO BE AMOUNT TO BE SHARE OF OFFERING AMOUNT OF
REGISTERED REGISTERED COMMON STOCK PRICE REGISTRATION FEE
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Common stock, Not
no par value 42,122,473 applicable $594,759,971 $205,090(1)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Previously paid.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PRUSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDMENT TO REGISTRATION STATEMENT
The Registrant hereby amends the Registration Statement to incorporate
the exhibit or exhibits filed herewith and to add the following item or items to
Item 21. See "Incorporation of Certain Information by Reference" in the Proxy
Statement contained in the Registration Statement.
Exhibit Description
99(g) Interoffice memo to MEC upper level managers
99(h) Updated Questions & Answers
99(i) Brochure Distributed to Securities Brokers
99(j) August 22, 1996 Slide Presentation
Signatures
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Des Moines, State of
Iowa, on the 22st day of August, 1996.
MIDAMERICAN ENERGY COMPANY
By /s/ S. J. BRIGHT
-----------------------------
S. J. Bright
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1933,
this report has been signed below by the following persons in the capacities
indicated, on the date set forth above.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ------------------------------
<C> <S>
/s/ R. E. CHRISTIANSEN* Chairman of the Board of Directors
- ----------------------------------- and Director
R. E. Christiansen
/s/ S. J. BRIGHT President, Chief Executive Officer
- ----------------------------------- and Director
S. J. Bright
/s/ P. G. LINDNER Group Vice President and Chief
- ----------------------------------- Financial Officer (Principal
P. G. Lindner Accounting Officer)
<PAGE>
/s/ J. W. AALFS* Director
- -----------------------------------
J. W. Aalfs
/s/ R. A. BURNETT* Director
- -----------------------------------
R. A. Burnett
/s/ R. D. CHRISTENSEN* Director
- -----------------------------------
R. D. Christensen
/s/ J. W. COLLOTON* Director
- -----------------------------------
J. W. Colloton
/s/ F. S. COTTRELL* Director
- -----------------------------------
F. S. Cottrell
/s/ J. W. EUGSTER* Director
- -----------------------------------
J. W. Eugster
/s/ M. FOSTER, JR.* Director
- -----------------------------------
M. Foster, Jr.
/s/ N. GENTRY* Director
- -----------------------------------
N. Gentry
/s/ J. M. HOAK, JR.* Director
- -----------------------------------
J. M. Hoak, Jr.
s/s R. L. LAWSON* Director
- -----------------------------------
R. L. Lawson
/s/ R. L. PETERSON* Director
- -----------------------------------
R. L. Peterson
<PAGE>
/s/ N. L. SEIFERT* Director
- -----------------------------------
N. L. Seifert
/s/ W. S. TINSMAN Director
- -----------------------------------
W. S. Tinsman
/s/ L. L. WOODRUFF* Director
- -----------------------------------
L. L. Woodruff
*By: /s/ P. J. LEIGHTON
- -----------------------------------
(P. J. Leighton
as Attorney-in-fact of
the persons indicated)
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- ----------------------------------------------------------------------------------------
<C> <S>
99(g) Interoffice memo to MEC upper level managers
99(h) Updated Questions & Answers
99(i) Brochure Distributed to Securities Brokers
99(j) August 22, 1996 Slide Presentation
</TABLE>
-1-
Exhibit 99(g)
[Interoffice Memo to MidAmerican Energy Upper Level Managers]
[MidAmerican Energy Logo]
interoffice
MEMORANDUM
to: Pay Grade 8 Managers
from: Merlyn F. Wiese
subject: IES Top Shareholder Solicitation
date: August 22, 1996
We are now ready to begin proxy solicitation of IES Shareholders. Sue Rozema and
I would like your help in calling the IES Shareholders who own the most shares.
"Solicitor Comment Forms" have been received for each IES Shareholder for which
a phone number was available. These comment forms, which you are now receiving,
represent the "Top 500" with phone numbers; you will each be receiving
approximately 30 forms.
I've pulled those forms for the Iowa individuals which you have indicated you
knew; some other preferences were also taken into consideration for your
respective stack of forms. In addition to the comment forms, copies of the
training materials are included.
WHEN TO CALL:
Calls should start on Thursday (8/22) and be completed on Friday or Monday
(8/26) at the latest. These IES Shareholders should all have received the Proxy
Statement and Blue Proxy card; most were Federal Expressed to these select
individuals.
WHAT TO DO WITH THE COMMENT FORMS:
It is very likely that these shareholders will be contacted a second time prior
to the September 5th vote. Since it is so crucial to get some feed back on these
folks, I would ask that you send the completed comment forms back to me (DMR28)
but keep a copy for yourself should a second phone contact be undertaken.
WHAT ABOUT THE TOP IES SHAREHOLDERS WITHOUT PHONE NUMBERS:
I have a listing for which I am attempting to obtain phone numbers. It is
anticipated that you will receive some more forms for these shareholders in the
very near future. I also expect to receive forms for the non-registered (street
name) shareholders.
In summary, this on-going task is maturing as the information becomes available.
Don't hesitate to call me if questions arise [515/281-2476]. I might not know
the answer, but I will track down a response.
Thanks for your help, working together should bring forth favorable results.
Exhibit 99(h)
[Updated Questions & Answers Portion of Training Materials]
4. Q. How is MidAmerican going to finance the transaction and where
will you get the money?
A. We expect to finance the cash portion of our proposal by
selling non-strategic assets and by using debt for the
remainder. We are confident that there will be no problem in
obtaining financing or in servicing the debt with existing
cash flows. Short-term borrowings used to finance the
transaction on an interim basis will be refinanced on a
permanent basis or repaid from the proceedings of the
company's non-regulated asset restructuring program.
17. Q. Why is MidAmerican's proposal so late (characterized as an
11th-hour proposal)?
A. Private merger discussions have been taking place with IES for
some time, including a specific proposal by MidAmerican to IES
in October 1995, a month before IES entered into the Wisconsin
deal. A standstill agreement between IES and a predecessor of
MidAmerican prevented MidAmerican from making any public
proposals to IES until August 1, 1996. MidAmerican delivered
its merger proposal to Mr. Liu and made that proposal public
on August 4, 1996.
18. Q. How does MidAmerican's stock price today compare to July 1995
when Midwest Resources and Iowa-Illinois merged?
A. MidAmerican stock opened at 14 3/4 on July 3, 1995.
MidAmerican stock opened today at (provide today's
opening price).
19. Q. Midwest Resources cut its dividend 25 percent following its
1992 merger. Will MidAmerican do the same?
A. MidAmerican's board of directors has committed to maintaining
the company's current dividend of $1.20 on an annualized basis
which translates into a dividend of $2.82 per IES share.
Earnings levels will support the dividend, with a payout ratio
estimated to be 80 percent in the year 2000. IES shareholders
who are concerned about the dividend may choose the cash
option.
20. Q. I'm voting against the Wisconsin deal. Should I also vote
against the board of directors on my proxy card?
A. How you vote is your decision.
<PAGE>
21. Q. I've already voted against the Wisconsin deal on an IES proxy
card. Do I need to send in the MidAmerican proxy card?
A. We would like you to also send in your MidAmerican proxy
voting against the Wisconsin deal. Knowing what percentage of
and which shareholders are against the Wisconsin deal will
assist in our efforts to solicit.
22. Q. If the Wisconsin deal is defeated, what will have to happen
for the MidAmerican/IES merger to go through?
A. We believe the IES board will heed the desires of the IES
shareholders by pursuing the MidAmerican proposal following
the defeat of the Wisconsin deal. If the IES board approves
the MidAmerican proposal, a majority of IES shareholders and
MidAmerican shareholders will have to vote in favor of a
merger. Then, regulatory approvals would need to be gained.
Our last merger took us only 11 months to complete and we
believe we would close an IES/MidAmerican proposal within 8 to
12 months of signing a definitive agreement.
Exhibit 99(i)
[Brochure Distributed to Securities Brokers]
MidAmerican merger proposal: a better choice
August 20, 1996
$655 million*
estimated savings of
MidAmerican/IES
merger 1998-2007
[Graphic presentation of PIE chart showing breakdown by percentage that
operating areas will contribute to overall estimated savings]
(In millions of dollars)
$86 - Purchase economies
$117 - Corporate/
administrative
$132 - System optimization
$349 - Labor
* Net of $29 million of costs
to achieve savings
MidAmerican Energy Company's strategy is to be a major low-cost
regional energy and communications provider. That's why MidAmerican has
proposed a more financially attractive merger to IES shareholders than the
proposed merger with WPL Holdings and Interstate Power Company. MidAmerican
currently is soliciting proxies from IES shareholders to vote against the
Wisconsin deal at the IES shareholder meeting scheduled for September 5.
Transaction terms
* Exchange ratio of 2.346 MidAmerican shares for each IES share in a tax-free
exchange
* Cash option of $39 per IES share, subject to maximum of 40% of outstanding
shares
Better dividend
Proposed IES dividend
in the Wisconsin deal: $2.25
Proposed IES dividend in
MidAmerican's proposal: $2.82
Added dividend value of
MidAmerican's proposal
over the Wisconsin deal: +25%
Better price
Value of IES stock in
the Wisconsin deal:* $36.05
(no cash offered)
Value of IES stock in
MidAmerican's proposal:# $38.30
(includes cash election for $39)
Added value of
MidAmerican's proposal
over the Wisconsin deal: +6%
* Based on August 16, 1996 closing stock prices
# Blended value based on 40% of IES shares receiving $39 per share in cash and
60% of IES shares receiving MidAmerican common stock worth $37.83 per share,
based on August 16, 1996 closing stock prices.
Contacts
J. Sue Rozema - Vice President & Treasurer 515-281-2250
IES shareholder questions 1-888-776-4692
Internet address http://www.midamerican.com
Statements herein constituting predictions of future events represent the
opinion of MidAmerican. MidAmerican believes it has a reasonable basis for
such opinions.
<PAGE>
Better strategy
Strong utility base
The MidAmerican proposal will create a strong base of operations from
which MidAmerican can grow as the transition to a deregulated energy market
continues to evolve.
MidAmerican and IES are fully interconnected, have contiguous
territories and have overlapping services in key communities where one company
currently provides gas and the other provides electricity. In addition, the
companies have joint ownership of 1,078 megawatts of cost-competitive coal-fired
generation. The generation facilities are strategically located and are
supported by a strong transmission grid that will enable MidAmerican to become a
successful participant in a competitive market.
Ownership in McLeod Inc.
MidAmerican and IES each own an interest in McLeod Inc., a full-service
regional telecommunications company based in Iowa. McLeod's management team
founded Telecom USA, which was sold to MCI in 1990 for $1.25 billion.
McLeod's initial public offering was priced at $20 per share in May and
has risen to $27.50 per share as of August 16, 1996. Market capitalization
currently totals approximately $1.2 billion.
Upon completion of the merger, MidAmerican would hold
approximately 41% of McLeod shares. This would enhance
MidAmerican's competitive position by strengthening the focus on
regional energy and communications services.
MidAmerican/IES merger unrecognized value
MidAmerican/IES pro forma cash flow*
(In millions, except per share amounts)
IES cash flow (12 months ended June 30, 1996) $ 206.3
Interest expense on new debt (18.0)
Acquired cash flow $ 188.3
MEC cash flow (12 months ended June 30, 1996) 435.0
After-tax synergies to shareholders 19.2
Combined cash flow $ 642.5
Combined shares outstanding 142.5
Pro forma cash flow per share $ 4.51
* Assumes 40% of total consideration is cash. Assumes $65 million
of synergies are split 50/50 between customers and shareholders.
Based upon after-tax cash flow from operations, exclusive of
non-recurring items.
Implied value
Pro forma cash flow per share $4.51
Typical Midwest utility multiple* 5-6 times
Cash flow value per share $22.54-$27.06
Combined McLeod holdings $497 million
Combined shares
outstanding (millions) 142.5
Combined McLeod holdings
per share $3.49
Total implied value
per share $26.03-$30.55
* Examples based on cash flow Illinova 5.1x
for the 12 months ended Western Resources 5.2x
March 31, 1996 NIPSCO 5.8x
<PAGE>
Company comparisons
(In millions, except statistics and % amounts)
MidAmerican IES Combined
Assets $ 4,500 $ 2,000 $ 6,500
Revenue $ 1,720 $ 850 $ 2,570
Earnings $ 123 $ 64 $ 187
Equity market value $ 1,612 $ 997 $ 2,609
MidAmerican IES Combined
Generating capacity
(megawatts) 4,311 2,080 6,391
Customers
Electric 631,000 332,000 963,000
Gas 595,000 173,000 768,000
Natural fit
* System integration eased by proximity
* No new regulatory jurisdictions
* Similar production costs and rates
* Gas and electric service provided separately in many key communities
Integrated system
* Contiguous service territory
* 1,078 megawatts of cost-competitive commonly owned and operated coal-fired
generation
* Direct electric interconnections already in place
Merged service area
[Geographical map of Iowa and parts of neighboring States showing
MidAmerican's 345 kV transmission system in comparison with IES', Interstate's
and other transmission systems within Iowa and such States]
<PAGE>
Strengths of MidAmerican's proposal
Regulatory approvals
MidAmerican has a track record of quickly completing mergers. The
merger that created MidAmerican was the most recent utility merger and was
completed in only 11 months. MidAmerican expects to complete this transaction in
a similar timeframe after signing an agreement with IES.
MidAmerican is convinced that the Wisconsin deal will not be completed
any sooner. In fact, the Wisconsin deal requires two additional state approvals
and Securities and Exchange Commission approval. It also has added complexities
associated with Federal Energy Regulatory Commission approval.
Cost savings
Since the public announcement, MidAmerican has carefully analyzed the
cost savings potential of its proposal. To date, savings of more than $650
million over 10 years following the merger have been identified.
Since MidAmerican has been unable to contact IES directly, the analysis
does not incorporate any additional savings that might be identified when the
company obtains full access to IES internal information. In addition, nearly all
of the savings identified are expense savings rather than capital savings.
Choice of cash or stock
MidAmerican's proposal allows IES shareholders a choice to receive
either cash or MidAmerican shares. Shareholders concerned about personal tax
implications can opt to obtain MidAmerican shares in a tax-free exchange.
The MidAmerican proposal is taxable only to those shareholders
who elect to receive cash rather than MidAmerican stock. If more than 40% of the
IES shares elect cash, then shareholders electing cash will receive a
combination of cash and stock, and the stock portion will be tax-free.
Customer benefits
MidAmerican has on file with regulators in Iowa and Illinois an
innovative pricing proposal that calls for immediate and future price reductions
and a five-year price freeze. Under MidAmerican's merger proposal, customers of
IES could also benefit from this plan. The pricing plan calls for sharing
between customers and shareholders of returns on equity above a threshold level
and could provide a basis for the sharing of merger savings with customers. The
Wisconsin deal, in comparison, includes no price reductions, no plans for the
sharing of benefits and only a three-year price freeze.
Financial strength
As shown on page two, MidAmerican has strong cash flows to support
future investments and its dividend. While MidAmerican will take on additional
debt to finance its proposal, it will be used to acquire IES shares. MidAmerican
believes this positive leverage will enhance shareholder value. In addition, the
cost savings associated with the transaction will further improve MidAmerican's
financial position.
Furthermore, MidAmerican is committed to the redeployment of
non-strategic assets and will use the proceeds to reduce debt, buy back stock or
invest in its core business. MidAmerican is actively evaluating strategic
alternatives for its wholly owned subsidiary, InterCoast Energy Company,
including possible divestiture.
Timely and compelling
MidAmerican has repeatedly tried since before IES announced its
Wisconsin deal to convince IES to at least meet to discuss a friendly
transaction. The MidAmerican proposal brings more value to IES shareholders than
the Wisconsin deal and did not come earlier only because of an existing
standstill agreement between IES and MidAmerican. MidAmerican believes its
proposal is clearly in the best interests of IES shareholders.
MidAmerican has filed with the Securities and Exchange Commission a proxy
statement and other materials relating to the solicitation of proxies against
the proposed IES/WPL/Interstate transaction and that proxy statement and the
other materials are incorporated herein by reference.
Exhibit 99(j)
[The following is the slide presentation given at four locations within the
state of Iowa to Securities Brokers by Executive Officers of MidAmerican Energy
Company on August 22, 1996.]
[Slide #1]
MIDAMERICAN ENERGY
COMPANY
PRESENTATION TO FINANCIAL COMMUNITY
AUGUST 1996
[MidAmerican Energy Logo]
<PAGE>
[Slide #2]
Forward-Looking Statements
From time to time during this
presentation, we will make
forward-looking statements.
* These statements may include:
- Cost reduction strategies and anticipated outcomes
- Pricing strategies
- Changes in utility industry
- Planned capital expenditures
- Financing needs and availability
- Future plans and strategies
- Anticipated events
* These statements are subject to risks and uncertainties
- Results could differ from those expressed in statements
* Some of these risks and uncertainties include:
- General economic conditions
- Competition factors
- Regulatory actions
- Potential weather effects on sales and revenue
- Others
[MidAmerican Energy Logo]
<PAGE>
[Slide #3]
MidAmerican Energy Company
* Gas and electric utility with unregulated subsidiaries
* Strategic intent is to be a regional energy and communications provider
* Serve over 630,000 electric customers and nearly 600,000 gas customers
in Iowa, Illinois, South Dakota and Nebraska
[MidAmerican Energy Logo]
<PAGE>
[Slide #4]
MidAmerican's Proposed Merger
With IES Industries
* Exchange ratio of 2.346 MidAmerican shares for each
IES share in a tax-free exchange
- Common Stock election available to all
* Cash election of $39 per IES share, subject to a
maximum of 40% of outstanding shares
- If cash election is oversubscribed, cash will be prorated
* IES shareholders can elect cash or common stock for
each share
[MidAmerican Energy Logo]
<PAGE>
[Slide #5]
Financial Considerations
* MidAmerican's proposal is compelling and
demonstrably superior
- 31% premium to IES market price (before announcement)
- 6% premium to revised Wisconsin transaction
- 25% higher dividend than the Wisconsin Transaction ($2.82
vs. $2.25)
- Election to receive stock or cash
[MidAmerican Energy Logo]
<PAGE>
[Slide #6]
Pre-Offer Communication
August 1993 IES - IIGE discussion
August 1995 Verbal contact
October 1995 Written correspondence including
request to make proposal
November 1995 Wisconsin deal announced
[MidAmerican Energy Logo]
<PAGE>
[Slide #7]
Strategic Elements of Combination
* Natural Fit
- System integration relatively seamless
- Joint ownership of 1,078 megawatts of generation
- No new regulatory jurisdictions
- Similar production costs and rates
- Contiguous and overlapping territory spans most of Iowa
[MidAmerican Energy Logo]
<PAGE>
[Slide #8]
Strategic Elements of Combination
[GRAPHIC]
Geographical map of State of Iowa depicting MidAmerican Energy Service Area, IES
Industries Service Area and Service Area Overlaps.
[MidAmerican Logo]
<PAGE>
[Slide #9]
Strategic Elements of Combination
* Synergy opportunities would benefit customers and
shareholders alike
- Preliminary savings estimate $655 million over 10 years
[MidAmerican Energy Logo]
<PAGE>
[Slide #10]
Preliminary Cost Savings
1998 - 2007 Time Frame
[PIE CHART]
Corporate/Administrative $117M
Purchasing Economics $86M
System Optimization $132M
Labor $349M
440 people - 7.6% of 5800 total
Estimated 10 year savings over $655 million*
* net of $29 million of costs to achieve savings
* Virtually all operating cost savings
* Based entirely on public information
* MidAmerican projected approximately $30
million annual O&M savings in its 1994
merger announcement. Has actually
achieved $50 million in estimated
savings.
* Estimate is conservative - not out of
line with other transactions
* Over 90% O & M vs. capital
[MidAmerican Logo]
<PAGE>
[Slide #11]
Strategic Elements of Combination
* Merged entity would have resources to focus on core business
- Redeployment of non-strategic, unregulated assets which
do not meet performance criteria
- Proceeds from potential sale, if sufficient, may be used for
non-utility investment, debt repayment or stock buy-back
[MidAmerican Energy Logo]
<PAGE>
[Slide #12]
Strategic Elements of Combination
* Combined company could more aggressively pursue
strategy in a competitive environment
- Natural linkage of telecommunication with electric products
and services
- Financial ability to develop and invest in products and
services which complement the core business
- Low cost production status reduces competitive risks
[MidAmerican Energy Logo]
<PAGE>
[Slide #13]
McLeod Inc.
* Iowa based full service regional telecommunications company
* Management team from prior Telecom USA company. Sold to MCI in
1990 for $1.25 billion.
* McLeod IPO @$20/share in May, 1996. Current price $28/share
* Market capitalization of approximately $1.2 billion
* Merged company will hold approximately 41% of total shares
* Carrying value for MidAmerican is approximately $36M
[MidAmerican Energy Logo]
<PAGE>
[Slide #14]
Pro Forma Cash Flow Impact
($ millions, except per share)
IES cash flow (latest twelve months 6/30/96) $206
Interest expense on new debt (18)
Acquired cash flow $188
MEC cash flow (latest 12 twelve months 6/30/96) 435
After-tax synergies to shareholders 19
Combined cash flow $642
Combined shares outstanding (million) 142
Pro forma per share -operating cash flow $4.51 per share
-dividend $1.20 per share
Notes: Assumes 40% of total consideration is cash.
Assumes $65 million synergies are split 50/50 between customers and
shareholders. Based on after-tax cash flow from operations, exclusive
of non-recurring items.
{MidAmerican Energy Logo]
<PAGE>
[Slide #15]
Unrecognized Value*1
Pro forma cash flow per share $4.51
Typical midwest utility multiple*2 5-6 times
$22.54-$27.06
Pro forma McLeod holding $497 million
Pro forma shares outstanding (million) 142
Pro forma McLeod holdings per share $3.49
Total implied value per share $26.03 - 30.55
*1 Based upon free cash flow and pro forma holding valuation methods, two
methods of valuation readily recognized in the financial community.
*2 Example based on cash Examples: Illinova 5.1x
flow for the 12 months Western Resources 5.0x
ended March 31, 1996 NIPSCO 5.8x
[MidAmerican Energy Logo]
<PAGE>
[Slide #16]
Merger Timing - Regulatory Realities
* Strong MEC track record of rapid merger approval
* Easier application process
- No Wisconsin or Minnesota approvals required
- Merger climate good in Iowa
- Avoid Registered Holding Company issue
* Fully integrated system
[MidAmerican Energy Log]
<PAGE>
[Slide #17]
345 kV Transmission System
[GRAPHIC]
Geographical map of Iowa and parts of neighboring States showing MidAmerican's
345 kV transmission system in comparison with IES', Interstate's and other
transmission systems within Iowa and such States.
[MidAmerican Logo]
<PAGE>
[Slide #18]
MEC-IES Merger Transaction
* Unique strategic and operational fit
* Substantial opportunity for synergies
* Financially compelling offer for shareholders
* Ability to quickly consummate a combination
* Creates powerful regional provider of energy and
communications products and services
* Everybody wins: shareholders, customers and employees
{MidAmerican Energy Logo]
<PAGE>
[Slide #19]
This is a unique strategic opportunity for
MidAmerican.
Our resolve is absolute.
[MidAmerican Energy Logo]
<PAGE>
[Slide #20]
QUESTIONS
[MidAmerican Energy Logo]
