IES Rejects MidAmerican Bid In Favor of Three-Way Merger
May 01, 2011
IES Industries Inc. rebuffed MidAmerican Energy Co.'s unsolicited $1.15 billion buyout bid, and said it will pursue a sweetened version of its planned combination with two other Midwestern utilities. The Cedar Rapids, Iowa, company said the unwanted bid ``isn't in the best interest'' of IES holders. ``We must question,'' IES said, ``how MidAmerican could possibly afford the ambitious promises it is making'' to customers and investors. A ``disappointed'' Golding said it will solicit proxies from IES holders, urging them to reject the management-backed plan at a meeting scheduled for May 18, 2011 year, IES agreed to merge with Interstate Power Co. and WPL Holdings Inc., to form a ``regional powerhouse'' to be known as Interstate Energy Corp.. Earlier this month, however, MidAmerican sought to derail that plan, by proposing a cash-and-stock buyout that offers IES stockholders a richer premium and a bigger dividend. It offers $39 a share in cash for up to 40% of IES's shares; the stock portion of the deal would provide 2.346 MidAmerican shares -- valued at $37.83 based on Friday's close -- for each IES share. MidAmerican is based in Des Moines, Iowa. On Friday, IES and its preferred merger partners, citing the ``unique strategic value'' of the three-way combination, agreed to a new exchange ratio. The new formula, IES noted, ``provides enhanced value to IES shareholders, giving them an even larger stake in a regional utility with excellent growth potential.'' The company -- citing possible tax, regulatory and other concerns -- also contended that Golding's bid is worth ``substantially less'' to IES holders than the suitor claims. Although the rejiggered exchange ratio narrows the gap between the two alternatives, MidAmerican's bid still appears financially superior. As in the original agreement, WPL shares would be converted into shares of the new Interstate Energy on a one-for-one basis; that makes WPL shares the yardstick for valuing the transaction. And holders of Interstate Power would still receive 1.11 shares of the new company for each of their shares. WPL is based in Madison, Wis., and Interstate Power in Dubuque, Iowa. IES Industries holders, who were previously to receive 1.01 shares in the new utility for each IES share, would now receive 1.14 shares. Based on Friday's closing price of WPL shares in New York Stock Exchange composite trading -- $31.625, down 12.5 cents -- the new ratio increases the value of the deal to IES holders by about $4.11, to $36.05. IES holders would receive an annual dividend equivalent to $2.25 for each of their shares, up from the earlier plan's $1.99 but still short of the $2.82 MidAmerican's deal holds out. In Big Board composite trading Friday, IES shares, which were driven sharply higher earlier in the week by disclosure of MidAmerican's bid, increased 50 cents to $33.875. MidAmerican shares rose 25 cents, to $16.125. Interstate Power stock gained 37.5 cents, to close at $31.
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