MEDIA CONTACTS: INVESTOR CONTACTS:
Susan Gallagher -- Union Electric Carlin Scanlan -- Union Electric
(314) 554-2175 (314) 554-2902
Lynne Galia -- CIPSCO Jim Goff -- CIPSCO
(217) 525-5232 (217) 525-5547
UNION ELECTRIC COMPANY OF MISSOURI AND CIPSCO
INCORPORATED OF ILLINOIS SIGN DEFINITIVE MERGER AGREEMENT
-- $1.2 Billion Transaction Will Create Premier Midwestern Utility With Assets
of More Than $8 Billion; Market Capitalization of the Two Companies Is $4.6
Billion
-- "Merger combines two financially strong, low-cost energy providers with
common visions and strategies and highly compatible operations and managements,"
says Union Electric President and CEO Charles W. Mueller
-- "The two companies' contiguous territories and similar customer-focused
philosophies make the combination a natural," says CIPSCO President and CEO
Clifford L. Greenwalt.
St. Louis, Mo., and Springfield, Ill., Aug. 14, 1995 -- Union Electric Company
(NYSE:UEP) and CIPSCO Incorporated (NYSE:CIP) have signed a definitive merger
agreement in a transaction valued at approximately $1.2 billion. The combined
market capitalization of the two companies is $4.6 billion. The merger will
create a combined company with assets in excess of $8 billion. The agreement
was approved by the boards of directors of both companies.
As a result of this transaction, a new, registered public utility
holding company will be formed as the parent of both Union Electric Company and
Central Illinois Public Service
Company (CIPS). The combined entity will serve 1.4 million electric customers
and 284,000 natural gas customers in a 44,000-square-mile area of Missouri and
Illinois. Under terms of the agreement, all of UE's 80,000 Illinois customers
will become customers of CIPS.
The agreement calls for holders of Union Electric common stock to
receive one share of the new holding company common stock for each Union
Electric share they hold and for holders of CIPSCO common stock to receive 1.03
shares of the new holding company common stock for each of their CIPSCO shares.
It is expected that the transaction will qualify as a tax-free exchange and will
be accounted for as a pooling of interests.
It is anticipated that the new holding company will adopt Union
Electric Company's dividend payment level. Union Electric's current indicated
annual dividend is $2.44 per common share, and CIPSCO's is $2.04. The boards of
both companies have historically increased dividends on a consistent basis.
The parties expect the combined entity to realize $570 million in
savings over 10 years from combining certain operations of the two companies.
Unlike several recent utility combinations, labor savings will not be the
dominant category of savings. Approximately two-thirds of the savings will
-2-
result from eliminating duplication in corporate and administrative programs,
from purchasing economies and reduced electric production and gas costs. About
a third of total savings will come through elimination of around 300 positions -
- essentially through attrition.
The combination joins two of the nation's lowest-cost energy
providers. Both are competitively positioned in the interchange market for the
sale of electricity. Their interconnections with 28 other systems will provide
substantial opportunities for additional interchange energy sales. The combined
companies will also achieve significant savings through the joint dispatch of
energy.
The parties expect that the transaction will be completed by year-end
1996 and that it will not be dilutive to earnings. The new holding company will
be based in St. Louis. The headquarters of Union Electric and CIPS will remain
in St. Louis and Springfield, Ill., respectively.
UE President and Chief Executive Officer Charles W. Mueller will serve
as the new holding company's chairman and chief executive officer. CIPSCO
President and Chief Executive Officer Clifford L. Greenwalt will assume the
title of vice chairman of the holding company.
-3-
The new holding company's 15-member board will include all 10 members
from Union Electric's existing board of directors and five members from CIPSCO's
board.
"The merger combines two financially strong, low-cost energy providers
with common visions and strategies and highly compatible operations and
managements," says Mueller. "This transaction allows us to spread the cost of
advanced energy delivery systems over a larger base, while keeping our rates low
and enhancing our reliability and service quality.
"Moreover, it will enable us to take full advantage of the changing
industry landscape to capitalize on our financial strengths, our service-
oriented cultures and our lean organizational structures. By doing so, we will
be well-positioned to continue to provide superior shareholder returns and
customer benefits, both now and into the next century."
Greenwalt adds, "The two companies' contiguous territories and similar
customer-focused philosophies make the combination a natural -- one that will
bring significant benefits to our respective shareholders, individual and
business customers, employees and the many communities we serve."
With regard to rates, Greenwalt says: "We expect the effect on rates
to be positive for the customer. As synergies
-4-
occur and certain costs of producing energy are reduced, customers will benefit.
The long-term outlook is that rates will be lower than they would have been if
this strategic combination had not occurred."
Mueller adds, "Both UE and CIPS will continue to maintain a strong
corporate presence in the communities we serve and to demonstrate a strong
commitment to economic development and community service. In addition, by
employing our much greater combined resources, we can invest more in advanced
systems, training and facilities to provide even better service, while remaining
a low-cost energy provider."
The agreement is subject to approval by the shareholders of both
companies and by regulatory agencies. Shareholder approval will be sought by
year-end 1995.
As of Aug. 11, 1995, Union Electric Company had 102,123,834 shares of
common stock outstanding, and CIPSCO had 34,069,542 common shares outstanding.
The preferred stock of Union Electric Company and Central Illinois
Public Service Company will remain outstanding after the transaction.
Filings will be submitted to the following government and regulatory
agencies: Illinois Commerce Commission, Missouri Public Service Commission,
Federal Energy Regulatory
-5-
Commission, Nuclear Regulatory Commission and the Securities and Exchange
Commission. In addition, the Federal Trade Commission and the Department of
Justice will review the agreement.
Based in St. Louis, Union Electric provides energy services --
electricity and natural gas -- to 1.2 million customers over a 24,500-square-
mile area in Missouri and Illinois. Based in Springfield, Ill., CIPSCO through
its utility subsidiary, Central Illinois Public Service Company, supplies
electricity to 317,000 customers and natural gas to 166,000 customers over a
20,000-square-mile region of central and southern Illinois. A second
subsidiary, CIPSCO Investment Company, manages CIPSCO's non-utility investments,
including leveraged leases, marketable securities and energy projects.
-6-
TRANSACTION AT A GLANCE
-----------------------
Union Electric Company: (NYSE:UEP) CIPSCO Incorporated: (NYSE:CIP) Current
Market Capitalization of the two companies: $4.6 billion
TERMS:
. UE and CIPSCO to exchange shares with the new holding company.
Transaction valued at approximately $1.2 billion. At date of closing,
UE common shareholders to own 1 share of new holding company common
stock for each share of UE stock; CIPSCO common shareholders to own
1.03 shares of new holding company common stock for each share of
CIPSCO common stock.
. Merger to be accounted for as a pooling of interests; to be a tax-
free reorganization for Federal income tax purposes.
. The new holding company to adopt UE's dividend payment level. UE's
current indicated dividend is $2.44 per common share; CIPSCO's is
$2.04. The boards of both companies have historically increased
dividends on a consistent basis. Preferred stock of UE and CIPS (the
principal utility subsidiary of CIPSCO) to remain outstanding after
the transaction.
. UE/CIPS to be held under a newly created holding company to be based
in St. Louis. The new holding company's chairman and CEO: UE
President and Chief Executive Officer Charles W. Mueller; Vice
Chairman: CIPSCO President and Chief Executive Officer Clifford L.
Greenwalt.
. Anticipated savings: $570 million over 10 years. Achieved through
elimination of duplication in corporate and administrative programs;
purchasing economies; reduced production costs; reduced staffing.
Labor not the dominant category.
TIMING:
. Filing with regulatory authorities: Fall 1995 -- Missouri Public
Service Commission, Illinois Commerce Commission, Federal Energy
Regulatory Commission. Then: Nuclear Regulatory Commission,
Securities and Exchange Commission.
-7-
Department of Justice, Federal Trade Commission to review.
. Anticipated shareholder vote: By year-end 1995.
Anticipated completion of transaction: By year-end 1996.
APPROVALS:
Shareholders of both companies. Regulators (see above).
-8-
COMPANY PROFILES: (AT 6/30/95)
------------------------------
UE CIPSCO
Earnings per share: $2.80 $2.23
Assets: $6.7 billion 1.8 billion
ROE: 12.7% 12.0%
Net Income: $299.4 million $76.1 million
Total
Revenues: $2.0 billion $811 million
Electric Revenues: $1,959 million $676 million
% industrial 19% 17%
% commercial 36% 26%
% residential 40% 31%
% wholesale/other 5% 26%
Gas Revenues: $85 million $127 million
Other Revenues: $0.4 million $8 million
Customers:
Electric 1.1 million 317,000
Gas 118,000 166,000
Reserve Margin: 18% 24%
Employees: 6,300 2,600
Electric generation: 7,800 MW net capacity 2,800 MW net capacity
Five fossil, one nuclear, three hydro plants Five fossil plants
Energy Mix: 70% coal; 25% Nuclear 99% coal; 1% oil
5% Hydro/Other
Bond Ratings:
Moody's A1 Aa1
Standard & Poor's AA- AA+
Common shares: 102,123,834 34,069,542
-9-