F O L E Y & L A R D N E R
A T T O R N E Y S A T L A W
CHICAGO FIRSTAR CENTER SAN DIEGO
JACKSONVILLE 777 EAST WISCONSIN AVENUE SAN FRANCISCO
LOS ANGELES MILWAUKEE, WISCONSIN 53202-5367 TALLAHASSEE
MADISON TELEPHONE (414) 271-2400 TAMPA
ORLANDO FACSIMILE (414) 297-4900 WASHINGTON, D.C.
SACRAMENTO WEST PALM BEACH
July 11, 1996
WPL Holdings, Inc.
222 West Washington Avenue
Madison, Wisconsin 53703
Ladies and Gentlemen:
You have requested our opinion as to material federal income tax
consequences of the proposed merger of IES Industries Inc. ("IES") with and into
WPL Holdings, Inc. ("WPLH") and the proposed merger of WPLH Acquisition Co.
("Acquisition") with and into Interstate Power Company ("IPC"), as more
completely described below and in the Joint Proxy Statement/Prospectus dated
July 11, 1996 ("Proxy Statement/Prospectus"). All capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in the
Proxy Statement/Prospectus.
A. Statement of Facts
WPLH is a Wisconsin corporation established as the holding company for
Wisconsin Power and Light Company (and its utility related subsidiary) and
certain nonutility subsidiaries. As of July 10, 1996, the outstanding shares of
WPLH capital stock consisted of 30,795,260 shares of common stock, $.01 par
value per share. Such shares are widely held and publicly traded.
IES is a corporation organized under the laws of the State of Iowa as
the holding company for a public utility engaged principally in generating,
purchasing, distributing and selling electric energy in portions of the State of
Iowa as well as certain nonutility subsidiaries. As of July 10, 1996, its
outstanding shares of stock consisted of 29,923,233 shares of common stock, no
par value per share ("IES Common Stock"). Such shares are widely held and
publicly traded.
IPC is an operating public utility organized under the laws of the
State of Delaware and engaged in the generation, purchase, transmission,
distribution and sale of electric energy. As of July 10, 1996, its outstanding
shares of stock consisted of (i) 9,595,028 shares of common stock, $3.50 par
value per share ("IPC Common Stock"), and (ii) 761,381 shares of preferred
stock, $50 par value per share ("IPC Preferred Stock"), in various series.
WPL Holdings, Inc.
July 11, 1996
Page 2
Acquisition is a corporation organized under the laws of the State of
Wisconsin which was created to effect the merger with IPC. It has, and prior to
the merger with IPC will have, no operations except as contemplated by the
Merger Agreement. WPLH is the only shareholder of Acquisition.
Subject to an alternative structure described below, the Merger
Agreement provides for: (i) the merger of IES with and into WPLH, which merger
will result in the combination of WPLH and IES as a single company with the name
Interstate Energy Corporation (WPLH having, in connection with such merger,
amended its Restated Articles of Incorporation to change its name) (the "IES
Merger"), pursuant to which each outstanding share of IES Common Stock (other
than shares held by IES shareholders who perfect dissenters' rights under
applicable state law, and other than shares owned by WPLH, IES or IPC or any of
their respective subsidiaries, which shares will be canceled) will be converted
into the right to receive 1.01 of a share of Interstate Energy Common Stock; and
(ii) the merger of Acquisition with and into IPC, which merger will result in
IPC becoming a subsidiary of Interstate Energy (the "IPC Direct Merger"),
pursuant to which (a) each outstanding share of IPC Common Stock (other than
shares owned by WPLH, IES or IPC or any of their respective subsidiaries, which
shares will be canceled) will be converted into the right to receive 1.11 shares
of Interstate Energy Common Stock and (b) each outstanding share of IPC
Preferred Stock (other than shares held by holders of IPC Preferred Stock who
perfect dissenters' rights under applicable state law ("IPC Dissenting Shares"))
will remain outstanding and shall be unchanged thereby. The IPC Preferred Stock
shall have additional voting rights as proposed to be approved at the IPC annual
meeting in 1996. 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 Merger Agreement provides, however, that if , prior to the
consummation of the transactions described above, the 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 Inc., an Iowa corporation and subsidiary of IES, will be merged
with and into New Utilities, pursuant to which each outstanding share of common
stock, $2.50 par value, of Utilities will be converted into one share of common
stock, $2.50 par value, of New Utilities. If the Utilities Reincorporation
Merger is to be consummated, it is currently anticipated that the shares of
cumulative preferred stock, $50 par value, of Utilities (the "Utilities
Preferred Stock") 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 hereby 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 IPC will be reconstituted to provide
for: (i) the merger of IPC with and into
WPL Holdings, Inc.
July 11, 1996
Page 3
New IPC pursuant to which (a) each outstanding share of IPC Common Stock (other
than shares owned by WPLH, IES or IPC or any of their respective subsidiaries,
which shares will be canceled) will be converted into one share of common stock,
par value $3.50 per share, of New IPC ("New IPC Common Stock") and (b) each
outstanding share of IPC Preferred Stock (other than IPC Dissenting Shares) will
be converted into one share of preferred stock, par value $50 per share, of New
IPC ("New IPC Preferred Stock") with terms (including dividend rates) and
designations under New IPC's Articles of Incorporation substantially identical
to those of IPC Preferred Stock under IPC's Restated Certificate of
Incorporation, including the additional voting rights proposed to be approved at
the IPC annual meeting in 1996; and (ii) the merger of Acquisition with and into
New IPC, which merger will result in New IPC becoming a subsidiary of Interstate
Energy (the "IPC Merger"), pursuant to which (a) each outstanding share of New
IPC Common Stock (other than shares owned by WPLH, IES or IPC or any of their
respective subsidiaries, which will be canceled) will be converted into the
right to receive shares of Interstate Energy Common Stock based on the IPC Ratio
and (b) each outstanding share of New IPC Preferred Stock (other than IPC
Dissenting Shares) will remain outstanding and unchanged as a result thereof.
B. Representations
The description in the Proxy Statement/Prospectus under the heading
"The Mergers - Certain Federal Income Tax Consequences" and our opinion as
stated herein are based upon and subject to:
(a) The Mergers and the amendments to the Restated Articles of
Incorporation of WPLH and the Restated Certificate of Incorporation of IPC being
effected in the manner described in the Proxy Statement/Prospectus.
(b) The accuracy and completeness of the statements concerning the
Mergers set forth in the Proxy Statement/Prospectus.
(c) The accuracy of the representations made to us by WPLH, IES and
IPC in their Officer's Certificates and their continuing accuracy at all times
through the Effective Time.
C. Opinions
Based upon the foregoing, and subject to the conditions and
limitations set forth below, we are of the opinion that:
(i) The IES Merger will qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code and the Utilities
Reincorporation Merger (if applicable) will qualify as a reorganization
within the meaning of Section 368(a) of the Code. The
WPL Holdings, Inc.
July 11, 1996
Page 4
IPC Direct Merger (or the IPC Merger, if applicable) will qualify as a
reorganization with within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E)
of the Code. WPLH, IES, IPC and Acquisition (and New IPC, Utilities and New
Utilities, if applicable) will each be a party to a reorganization within the
meaning of Section 368(b) of the Code;
(ii) No gain or loss will be recognized by WPLH, IES, IPC or
Acquisition (or New IPC, Utilities and New Utilities, if applicable)
pursuant to the Mergers;
(iii) No gain or loss will be recognized by a shareowner of WPLH
upon consummation of the Mergers and their tax basis and holding period of
the WPLH Common Stock will not change.
D. Limitations
We express no opinion on the following matters:
(i) The tax treatment of the Mergers under other provisions of
the Code and the regulations thereunder;
(ii) The tax treatment of any conditions existing at the time of, or
effects resulting from, the Mergers that are not specifically addressed
herein; or
(iii) The tax treatment of the Mergers under the laws of any
state or commonwealth or any other jurisdiction other than the United
States.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement on Form S-4
and to the reference to our firm under the heading "The Mergers - Certain
Federal Income Tax Consequences" in the Proxy Statement/Prospectus that
constitutes part of the Registration Statement.
Very truly yours,
FOLEY & LARDNER