Media contact: Sam Wilson (319) 326-7278
Investor relations contact: Lance Cooper (319) 326-7313
July 27, 1994
DAVENPORT, Iowa, July 27 - In a joint statement, Stanley J.
Bright, Chairman, President and Chief Executive Officer (CEO) of
IOWA-ILLINOIS GAS AND ELECTRIC COMPANY (NYSE: IWG) and Russell E.
Christiansen, Chairman, President and CEO of MIDWEST RESOURCES,
INC. (NYSE:MWR) today announced their respective boards of
directors have unanimously approved a strategic "merger of
equals" of Midwest Resources and Iowa-Illinois to form
MIDAMERICAN ENERGY COMPANY.
Under the proposed merger, MidAmerican Energy Company will
be structured as a utility with Midwest Resources and Iowa-
Illinois being merged into the new company. MidAmerican will
continue the former electric operations of Midwest Power and
Iowa-Illinois as a single electric business unit and will also
continue the gas operations of Midwest Gas and those of Iowa-
Illinois as a single gas business unit. Nonregulated operations
of both companies will also be continued as subsidiaries of
MidAmerican.
Midwest Resources provides electric service to 420,000
customers in central and western Iowa and southeastern South
Dakota, and gas service to more than 340,000 customers in Iowa,
South Dakota and Nebraska. Iowa-Illinois provides electric
service to nearly 200,000 customers in central and eastern Iowa
and northwestern Illinois and gas service to more than 240,000
customers in the region. Both companies also have substantial
non-regulated businesses (Midwest Resources' Midwest Capital
Group and Iowa-Illinois' InterCoast Energy Company).
Merger Specifics
Under the merger agreement, Midwest's common shareholders
will receive one share of MidAmerican for each Midwest share and
Iowa-Illinois' common shareholders will receive 1.47 shares of
MidAmerican Energy for each Iowa-Illinois share. The boards of
directors anticipate that MidAmerican will initially have an
indicated annual common stock dividend of $1.20 per share.
Upon the formation of the new company, Christiansen and
Bright will occupy an "Office of the CEO" with Christiansen as
Chairman and Bright as President. Bright will be named CEO at
the end of the initial year of operation of the new company.
Christiansen will continue to serve as Chairman until his
retirement on May 31, 1997.
In the announcement, Christiansen noted that the two
companies "... consider the merger to be an essential strategic
step in order to achieve the higher efficiencies, improved
productivity, and cost reductions required to ensure a continued
strong competitive position. The results should benefit both
customers and shareholders through reduced or avoided costs." He
noted that the average electric and gas rates of the two
companies are similar and well below national averages.
Merger Is Good for Regional Economy
"The merger is also in the best interests of the states and
communities we serve," Bright added. "It helps to assure that
the states will be able to offer competitive energy costs as
compared to other areas of the country."
MidAmerican Energy Company will be the largest electric and
gas utility operating in Iowa with combined revenues of
approximately $1.8 billion, combined assets of approximately $4.4
billion and total capitalization of approximately $2.7 billion.
The company will serve 620,000 electric customers and more than
580,000 gas customers. The combined electric generating capacity
of Midwest Resources and Iowa-Illinois is more than 4,200
megawatts. The combined 1993 gas throughput was in excess of 147
billion cubic feet. The new company's service territory will
span the state of Iowa and include most of Iowa's major cities.
Christiansen emphasized that major factors driving the
merger are the substantial changes which are occurring in the
electric and gas industries, including the advent of deregulation
and increasing competition. He noted that "the two companies
have many complementary strengths, including contiguous electric
and gas distribution territories and joint ownership interests in
four low-cost, environmentally clean coal-fired electric
generating plants with common transmission assets."
Bright noted that "the new company will be able to achieve
substantial savings by eliminating duplicate functions, avoiding
new electric generating capacity and reducing fuel and natural
gas costs through greater purchasing power." Bright pointed out
that "preliminary studies show that the merger will result in
savings of more than $400 million over 10 years."
"While the elimination of duplicate positions will require
reductions in the total work force of about 250 positions, we
believe they can be achieved through attrition, strictly
controlled hiring and other programs. Reassignment and
retraining will also be part of the process," he added.
Both executives emphasized that the historically strong
commitments of the two companies to the support of state and
community economic development programs will continue, as
evidenced by MidAmerican's organizational structure. The new
company will have its corporate headquarters in Des Moines.
Electric and gas business units will be headquartered in
Davenport and Sioux City, respectively.
The board of directors of the new company will initially
include eleven members of the current Midwest Resources board and
eight members of the current Iowa-Illinois board. Christiansen
and Bright will be the sole inside directors.
Five Key Reasons for the Merger
Christiansen and Bright presented the following strong reasons
for the merger:
It creates a larger, stronger company well positioned to
grow and prosper in an increasingly competitive environment;
It creates added shareholder value through increased
efficiency and reduced or avoided costs, resulting in a
financially stronger, more competitive company;
Customers will benefit from reduced costs of the combined
company which will keep rates low into the future.
The new company will have a diverse and growing base of
industrial, commercial, agricultural and residential
customers; and
The new company will be well positioned to take advantage of
future strategic opportunities as the demands of a
competitive market intensify.
Required Approvals
The merger agreement is subject to approval by the
shareholders of both companies and the following regulatory
agencies: the Federal Energy Regulatory Commission, and the
state regulators in Iowa, Illinois and South Dakota. A filing
also will be made with the Federal Trade Commission under the
Hart-Scott-Rodino Act. Completion of the merger is expected in
the second half of 1995.
Both companies also announced second quarter earnings today
in separate announcements. Midwest Resources announced second
quarter earnings of 16 cents per share and year-to-date earnings
of 67 cents. Iowa-Illinois announced second quarter earnings of
44 cents per share and year-to-date earnings of 98 cents per
share.
Midwest Resources is a utility holding company headquartered
in Des Moines. The utility subsidiary, Midwest Power Systems
Inc., has two operating divisions: Midwest Power, which provides
electric service in Iowa and South Dakota, and Midwest Gas, which
provides natural gas service in Iowa, Nebraska and South Dakota.
Non-regulated investments are operated through a second
subsidiary, Midwest Capital Group, Inc.