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
WPL Holdings, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 1-9894 39-1380265
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
222 West Washington Avenue, Madison, Wisconsin 53703
(Address of principal executive offices, including zip code)
(608) 252-3311
(Registrant's telephone number)
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 twenty (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+" 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 registra-
tion, "aa3" rated preferred stock, "(P)aaa3" 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
the 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 thereunto duly authorized.
WPL HOLDINGS, INC.
Date: November 17, 1995 By: /s/ Edward M. Gleason
Edward M. Gleason
Vice President, Treasurer and
Corporate Secretary
WPL HOLDINGS, INC.
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.