SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported): November 10, 1995
Interstate Power Company
(Exact Name of Registrant as Specified in Charter)
Delaware 1-3632 42-0329500
(State or Other Juris- (Commission File (IRS Employer
diction of Incorporation) Number) Identification
No.)
1000 Main St., P.O. Box 769, Dubuque, IA 52004-0769
(Address of principal executive offices) Zip Code)
Registrant's telephone number: (319) 582-5421
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
WPL Holdings, Inc., a holding company incorporated
under the laws of the State of Wisconsin ("WPL"), IES Industries
Inc., a holding company incorporated under the laws of the State
of Iowa ("IES"), Interstate Power Company, an operating public
utility incorporated under the laws of the State of Delaware
("IPC"), and AMW Acquisition, Inc., a wholly owned subsidiary of
WPL incorporated under the laws of the State of Delaware ("AMW"),
have entered into an Agreement and Plan of Merger, dated as of
November 10, 1995 (the "Merger Agreement"), providing for (a) the
merger of IES with and into WPL, which merger will result in the
combination of WPL and IES as a single company (the "IES
Merger"), and (b) the merger of AMW with and into IPC, which
merger will result in IPC becoming a wholly owned subsidiary of
WPL (the "IPC Merger", and together with the IES Merger, the
"Merger"). The Merger, which was unanimously approved by the
Board of Directors of each of the constituent companies, is
expected to close promptly after all of the conditions to the
consummation of the Merger, including obtaining all applicable
regulatory approvals, are fulfilled or waived. The regulatory
approval process is expected to take approximately 12 to 18
months.
In the Merger, WPL will change its name to Interstate
Energy Corporation ("Interstate Energy") and Interstate Energy,
as the holding company of the combined enterprise, will be
registered under the Public Utility Holding Company Act of 1935,
as amended. Interstate Energy will be the parent company of
WPL's present principal utility subsidiary, Wisconsin Power and
Light Company ("WP&LC"), IES's present utility subsidiary, IES
Utilities Inc. ("Utilities"), and IPC. Following the Merger, the
non-utility operations of WPL and IES, Heartland Development
Corporation and IES Diversified Inc., respectively, will be
combined under one entity to manage the diversified operations of
Interstate Energy.
Under the terms of the Merger Agreement, each
outstanding share of common stock, no par value, of IES will be
cancelled and converted into the right to receive .98 of a share
of common stock, par value $.01 per share, of Interstate Energy
(the "Interstate Energy Common Stock") and each outstanding share
of common stock, par value $3.50 per share, of IPC will be
cancelled and converted into the right to receive 1.11 shares of
Interstate Energy Common Stock. The outstanding shares of common
stock, par value $.01 per share, of WPL will remain unchanged and
outstanding as shares of Interstate Energy Common Stock. As of
the close of business on November 10, 1995, WPL had approximately
30.8 million common shares outstanding, IES had approximately
29.3 million common shares outstanding and IPC had approximately
9.6 million common shares outstanding. Based on such
capitalization, the Merger will result in the common shareowners
of WPL holding 43.9% of the common equity of Interstate Energy,
the common shareowners of IES receiving 40.9% of the common
equity of Interstate Energy and the common shareowners of IPC
receiving 15.2% of the common equity of Interstate Energy. Each
outstanding share of preferred stock, par value $50 per share, of
IPC will be unchanged as a result of the Merger and will remain
outstanding. In this Current Report on Form 8-K, unless the
context otherwise requires, all references to Interstate Energy
Common Stock include, if applicable, the associated rights to
purchase shares of such common stock pursuant to the terms of the
Rights Agreement between WPL and Morgan Shareholder Services
Trust Company, as Rights Agent thereunder, dated as of February
22, 1989.
The parties expect that the dividend at the effective
time of the Merger will be the dividend then being paid by WPL.
Subsequent dividend policy will be developed by the Board of
Directors of Interstate Energy.
The Merger is subject to customary closing conditions,
including, without limitation, the receipt of required shareowner
approvals of WPL, IES and IPC; and the receipt of all necessary
governmental approvals and the making of all necessary
governmental filings, including approvals of state utility
regulators in Illinois, Iowa, Minnesota and Wisconsin, the
approval of the Federal Energy Regulatory Commission, the
Securities and Exchange Commission (the "SEC") and the Nuclear
Regulatory Commission, and the filing of the requisite
notification with the Federal Trade Commission and the Department
of Justice under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the expiration of the applicable waiting
period thereunder. The Merger is also subject to receipt of
opinions of counsel that the Merger will qualify as a tax-free
reorganization, and assurances from the parties' independent
accountants that the Merger will qualify as a pooling of
interests for accounting purposes. In addition, the Merger is
conditioned upon the effectiveness of a registration statement to
be filed by WPL with the SEC with respect to shares of the
Interstate Energy Common Stock to be issued in the Merger and the
approval for listing of such shares on the New York Stock
Exchange. (See Article IX of the Merger Agreement.) It is
anticipated that shareowners will vote upon the Merger at the
upcoming annual meetings in the second quarter of 1996.
The Merger Agreement contains certain covenants of the
parties pending the consummation of the Merger. Generally, the
parties must carry on their businesses in the ordinary course
consistent with past practice, may not increase dividends on
common stock in excess of current levels in the case of IES and
IPC and beyond a specified limit in the case of WPL, and may not
issue any capital stock beyond certain limits. The Merger
Agreement also contains restrictions on, among other things,
charter and bylaw amendments, acquisitions, capital expenditures,
dispositions, incurrence of indebtedness, certain increases in
employee compensation and benefits, and affiliate transactions.
(See Article VII of the Merger Agreement.)
The Merger Agreement provides that, after the
effectiveness of the Merger (the "Effective Time"), the corporate
headquarters and principal executive offices of Interstate Energy
and WP&LC will remain in Madison, Wisconsin, the headquarters of
Utilities will remain in Cedar Rapids, Iowa, and the headquarters
of IPC will remain in Dubuque, Iowa. Interstate Energy's Board
of Directors, which will be divided into three classes, will
consist of a total of 15 directors, 6 of whom will be designated
by WPL, 6 of whom will be designated by IES and 3 of whom will be
designated by IPC. Mr. Lee Liu, the current Chairman of the
Board, President and Chief Executive Officer of IES, will serve
as Chairman of the Board of Directors of Interstate Energy for a
period of two years from the Effective Time. Mr. Wayne H.
Stoppelmoor, the current Chairman of the Board, President and
Chief Executive Officer of IPC, will serve as Vice Chairman of
the Board of Directors of Interstate Energy for a period of two
years from the Effective Time. Mr. Erroll B. Davis, Jr., the
current President and Chief Executive Officer of WPL, will become
President and Chief Executive Officer of Interstate Energy from
the Effective Time. Mr. Davis will also assume the position of
Chairman of the Board when Mr. Liu retires as Chairman. (See
Article VIII of the Merger Agreement.)
The Merger Agreement may be terminated under certain
circumstances, including (i) by mutual consent of the parties;
(ii) by any party if the Merger is not consummated by May 10,
1997 (provided, however, that such termination date shall be
extended to May 10, 1998 if all conditions to closing the Merger,
other than the receipt of certain consents and/or statutory
approvals by any of the parties, have been satisfied by May 10,
1997); (iii) by any party if any of WPL's, IES's or IPC's
shareowners vote against the Merger or if any state or federal
law or court order prohibits the Merger; (iv) by a non-breaching
party if there exist breaches of any representations or
warranties contained in the Merger Agreement or in the Stock
Option Agreements (as hereinafter defined), as of the date
thereof, which breaches, individually or in the aggregate, would
result in a material adverse effect on the breaching party and
which are not cured within twenty (20) days after notice; (v) by
a non-breaching party if there occur breaches of specified
covenants in the Merger Agreement or material breaches of any
covenant or agreement in the Merger Agreement or in the Stock
Option Agreements which are not cured within (20) days after
notice; (vi) by any party if the Board of Directors of any other
party shall withdraw or adversely modify its recommendation of
the Merger or shall approve or recommend any competing
transaction; or (vii) by any party, under certain circumstances,
as a result of a third-party tender offer or business combination
proposal which such party, pursuant to its directors' fiduciary
duties, is, in the opinion of such party's counsel and after the
other parties have first been given an opportunity to make
concessions and adjustments in the terms of the Merger Agreement,
required to accept. (See Article X of the Merger Agreement.)
The Merger Agreement provides that if a breach
described in clause (iv) or (v) of the previous paragraph occurs,
then, if such breach is not willful, the non-breaching party or
parties will be entitled to reimbursement of its or their out-of-
pocket expenses, not to exceed $5 million to each non-breaching
party. In the event of a willful breach, the non-breaching party
or parties will be entitled to its or their out-of-pocket
expenses (which shall not be limited to $5 million) and any
remedies it or they may have at law or in equity, and provided
that if, at the time of the breaching party's or parties' willful
breach, there shall have been a third party tender offer or
business combination proposal which shall not have 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 accept an offer to consummate or consummates a business
combination with such third party, then such breaching party or
parties, upon the closing of such business combination, will pay
to the non-breaching party or parties an additional aggregate fee
equal to $25 million, if WPL or IES is the breaching party, or
$12.5 million, if IPC is the breaching party. The Merger
Agreement also requires payment of an aggregate termination fee
of $25 million, if WPL or IES is the Target Party (as hereinafter
defined), or $12.5 million, if IPC is the Target Party, together
with reimbursement of out-of-pocket expenses, by one party (the
"Target Party") to the other parties in the following
circumstances: (1) the Merger Agreement is terminated (x) as a
result of the acceptance by the Target Party of a third-party
tender offer or business combination proposal, (y) following a
failure of the shareowners of the Target Party to grant their
approval to the Merger or (z) as a result of the Target Party's
material failure to convene a shareowner meeting, distribute
proxy materials and, subject to its board of directors' fiduciary
duties, recommend the Merger to its shareowners; (2) at the time
of such termination or prior to the meeting of such party's
shareowners there shall have been a third-party tender offer or
business combination proposal which shall not have been rejected
by the Target Party or withdrawn by such third party; and (3)
within two and one-half years of any such termination described
in clause (1) above, the Target Party accepts an offer to
consummate or consummates a business combination with such third
party. The applicable termination fee and out-of-pocket expenses
referred to in the previous sentence will be paid at the closing
of such third-party business combination. The termination fees
payable by WPL, IES and/or IPC under the foregoing provisions
plus the aggregate amount which could be payable by WPL, IES
and/or IPC under the Stock Option Agreements may not exceed $40
million (for WPL or IES) or $20 million (for IPC) in the
aggregate. In addition to the foregoing, if the Merger Agreement
is terminated under circumstances that give rise to the payment
of the termination fee discussed above by the Target Party
referred to above and within nine months of such termination one
of the non-terminating parties is acquired by the same third
party offeror, the sole remaining party will be entitled to (i) a
second termination fee of $25 million, if WPL or IES is the
second target party, or $12.5 million if IPC is the second target
party, on the signing of a definitive agreement relating to such
business combination, and (ii) payment of any termination fee
paid to such second target party by the original terminating
party (i.e., first Target Party) pursuant to the termination of
the Merger Agreement. If only one party must pay expenses, or is
entitled to receive a termination fee as set forth above, such
party will pay or receive one hundred percent (100%) of the
applicable expenses or fee. If two parties are required to pay
expenses or entitled to receive any such fee, each such party's
percentage of such expenses or fee will equal a fraction, the
numerator of which shall be, in the case of IES or IPC, the
number of shares of Interstate Energy Common Stock which would
have been issuable (on a fully diluted basis) to such party's
shareowners, or, in the case of WPL, the number of shares of
Interstate Energy Common Stock (on a fully diluted basis) that
would have been retained by its shareowners, had the effective
time of the Merger occurred at the time the Merger Agreement is
terminated, and the denominator of which will be the aggregate
number of shares of Interstate Energy Common Stock that would
have been issuable to or retained by (in either case on a fully
diluted basis) the shareowners of the two parties required to pay
expenses or entitled to receive such fee had the effective time
of the Merger occurred at the time the Merger Agreement is
terminated. (See Article X of the Merger Agreement.)
Concurrently with the Merger Agreement, WPL, IES and
IPC entered into reciprocal stock option agreements (the "Stock
Option Agreements") each granting the other two parties an
irrevocable option to purchase a specified percentage of up to
that number of shares of common stock of the granting company
which equals a collective aggregate of 19.9% of the number of
shares of common stock of the granting company outstanding on
November 10, 1995 at an exercise price of $30.675 per share of
WPL Common Stock, $26.7125 per share of IES Common Stock or
$28.9375 per share of IPC Common Stock, as the case may be, under
certain circumstances if the Merger Agreement becomes terminable
by one or more parties as a result of one or more other parties'
breach or as a result of one or more of the other parties
becoming the subject of a third-party proposal for a business
combination. Any party whose option becomes exercisable (the
"Exercising Party") (i) will have the right to receive, under
certain circumstances, a cash settlement that would pay to the
Exercising Party the difference between the exercise price and
the then current market price and (ii) may request that the
granting company repurchase from it all or any portion of the
Exercising Party's option at the price specified in the Stock
Option Agreements. (See the Stock Option Agreements.)
Interstate Energy is expected to be the 34th-largest
investor-owned utility holding company in the United States based
on the 1994 combined revenues of WPL, IES and IPC of $1.9
billion. It is anticipated that Interstate Energy will have a
market capitalization of approximately $2 billion (based on the
current combined market capitalization of WPL, IES and IPC) and
assets of nearly $4 billion (based on December 31, 1994 combined
asset totals). It is expected that Interstate Energy will serve
more than 850,000 electric customers and 360,000 natural gas
customers in Iowa, Illinois, Minnesota and Wisconsin. The
business of Interstate Energy will consist of utility operations
and various non-utility enterprises.
A preliminary estimate indicates that the Merger will
result in net savings of approximately $700 million in costs over
10 years.
In response to the announcement of the Merger, Standard
and Poor's Corporation ("S&P") placed its ratings of WP&LC's "AA"
rated senior secured debt, "AA-" rated preferred stock and "A-1+"
rated commercial paper on CreditWatch with negative implications.
The ratings of Utilities' "A" rated senior secured debt, "A-"
rated preferred stock and "A-1" rated commercial paper were
placed on CreditWatch with positive implications. The ratings of
IPC's "A+" rated senior secured debt, "A" rated senior unsecured
debt, "A" rated preferred stock and "A-1" rated commercial paper
were affirmed. S&P indicated that if the Merger is completed,
the likely credit ratings for the senior secured debt of WP&LC,
Utilities and IPC are expected to be "A+".
Moody's Investors Service ("Moody's") placed WP&LC's
"Aa2" rated senior secured debt, "(P)Aa2" rated senior secured
debt shelf registration, "aa3" rated preferred stock, "(P)aa3"
rated preferred stock shelf registration and "Aa3" counterparty
rating under review for possible downgrade. The ratings of
Utilities' "A2" rated senior secured debt, "(P)A2" rated senior
secured debt shelf registration, "A2" rated secured pollution
control bonds, "A3" unsecured pollution control bonds, "(P)A3"
rated senior unsecured debt shelf registration, "(P)Baa1" rated
junior subordinated unsecured debt shelf registration and "A3"
counterparty rating have been placed under review for possible
upgrade. In addition, IPC's "A1" rated senior secured debt,
"(P)A1" rated senior secured debt shelf registration, "A2" rated
unsecured pollution control bonds, "a2" rated preferred stock,
"(P)a2" rated preferred stock shelf registration and "A2"
counterparty rating have been placed under review for possible
downgrade. Moody's indicated that the "Prime-1" short term
ratings of the three companies are not under review.
WPL, IES and IPC recognize that the divestiture of
their existing gas operations and certain non-utility operations
is a possibility under the new registered holding company
structure, but will seek approval from SEC to maintain such
businesses. If divestiture is ultimately required, the SEC has
historically allowed companies sufficient time to accomplish
divestitures in a manner that protects shareowner value.
The Merger Agreement, the press release issued in
connection therewith and the Stock Option Agreements are filed as
exhibits to this Current Report on Form 8-K and are incorporated
herein by reference. The brief summaries of the material
provisions of the Merger Agreement and the Stock Option
Agreements set forth above are qualified in their entirety by
reference to each respective agreement filed as an exhibit
hereto.
Item 7. Financial Statements and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits.
The exhibits listed in the accompanying Exhibit
Index are filed as part of this Current Report on
Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
INTERSTATE POWER COMPANY
Date: November 17, 1995 By: /s/ Wayne H. Stoppelmoor
Chairman of the Board,
President and Chief
Executive Officer
INTERSTATE POWER COMPANY
EXHIBIT INDEX TO FORM 8-K
Report Dated November 10, 1995
Exhibit
(2.1) Agreement and Plan of Merger, dated as of November 10,
1995, by and among WPL Holdings, Inc., IES Industries
Inc., Interstate Power Company and AMW Acquisition,
Inc.*
(2.2) Option Grantor/Option Holder Stock Option and Trigger
Payment Agreement, dated as of November 10, 1995, by
and among WPL Holdings, Inc. and IES Industries Inc.
(2.3) Option Grantor/Option Holder Stock Option and Trigger
Payment Agreement, dated as of November 10, 1995, by
and among WPL Holdings, Inc. and Interstate Power
Company.
(2.4) Option Grantor/Option Holder Stock Option and Trigger
Payment Agreement, dated as of November 10, 1995, by
and among IES Industries Inc. and WPL Holdings, Inc.
(2.5) Option Grantor/Option Holder Stock Option and Trigger
Payment Agreement, dated as of November 10, 1995, by
and among IES Industries Inc. and Interstate Power
Company.
(2.6) Option Grantor/Option Holder Stock Option and Trigger
Payment Agreement, dated as of November 10, 1995, by
and among Interstate Power Company and WPL Holdings,
Inc.
(2.7) Option Grantor/Option Holder Stock Option and Trigger
Payment Agreement, dated as of November 10, 1995, by
and among Interstate Power Company and IES Industries
Inc.
(99) WPL Holdings, Inc., IES Industries Inc. and Interstate
Power Company Press Release, dated November 11, 1995.
__________________
* Certain of the schedules and exhibits to this document are
not being filed herewith. The Registrant agrees to furnish
supplementally a copy of any such omitted schedule or
exhibit to the Securities and Exchange Commission upon
request.