Wisconsin Power Proposes Merger With 2 Iowa Utilities

Wisconsin Power & Light Co. said it plans to merge with Iowa-based utilities IES Industries Inc. and Interstate Power Co. in a three-way stock deal valued at $1.2 billion.

The deal announced Saturday is the latest in a wave of consolidations sweeping the industry as utility companies face an increasingly challenging environment partly due to a 1992 federal law that stresses deregulation.

The National Energy Policy Act could eventually open up competition among utility companies for customers who now deal with state-regulated monopolies and many companies are positioning themselves.

“The electric utility world is changing around us and we must be ready for the new competition era. This strategic combination will ensure our position in a competitive regional market,” said Wayne Stoppelmoor, chairman and chief executive of Dubuque, Iowa-based Interstate Power Co.

The new company, Interstate Energy Corp., would serve more than a million electric and gas customers in Iowa, Wisconsin, Minnesota and Illinois. It would have a market value of $2 billion and assets of $4 billion.

The merged company would be the nation’s 34th-largest utility based on the partners’ 1994 combined revenues of $1.91 billion.

Consolidation of the three companies would save about $700 million over the next decade, officials said. The three companies, which together have 5,500 employees, expect to cut the work force by 10% to 15%.

“We’re hoping that most of that can be accomplished through attrition. We’re not anticipating any layoffs,” said Stoppelmoor, who would become the vice chairman of the new company.

IES Chairman Lee Liu said the merger would provide customers with “more stable, more competitive” electric prices, but he couldn’t say whether rates would go down.

Under the deal, Madison-based Wisconsin Power & Light would issue 0.98 of its shares for each of Cedar Rapids, Iowa-based IES Industries’ 29.3 million shares and 1.11 Wisconsin Power shares for each of Interstate Power’s 9.6 million common shares.

The deal is valued at $1.2 billion based on Wisconsin Power’s closing price Friday of $30.75 per share on the New York Stock Exchange. Under the deal IES shareholders will receive $30.14 of WPL stock for each share and Interstate Power holders would receive $34.13 of WPL stock for each share.

Under the deal, WPL would own a 43.9% stake in the new company, IES Industries 40.9% and Interstate Power 15.2%.

The merger must be approved by stockholders of the three utilities and federal and state regulators. Officials hope to complete the deal by early 1997. The new company would be based in Madison.

Liu would serve as chairman of the new company. Stoppelmoor would be vice chairman. Erroll B. Davis Jr., chairman, president and chief executive of WPL Holdings, would become president and chief executive officer.