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ScottishPower And PacifiCorp Announce Agreed Merger

ScottishPower, a leading UK multi-utility, today announces an agreed merger with PacifiCorp, a US electric utility.
 
PacifiCorp is an ideal partner for ScottishPower. It serves electricity customers in six western states, is vertically integrated and has a high-quality asset base.
 
The combined group, which will continue to be called ScottishPower, will be headquartered in Glasgow and retain its primary listing in London. Its US head office will be in Portland, Oregon.
 
Under the terms of the agreement, each PacifiCorp share will be exchanged for 0.58 American Depositary Receipts or 2.32 ordinary shares of ScottishPower. Before allowance for any buyback, this will give ScottishPower shareholders approximately 64% and current PacifiCorp shareholders approximately 36% ownership in the combined group. Based on a share price of 650p, the ScottishPower reference share price used in negotiations, the merger terms imply a price per PacifiCorp share of $25 1/8. Based on the closing price of ScottishPower on 4 December, 1998, the last business day prior to this announcement, the merger terms imply a value for the equity of PacifiCorp of £4.7 billion.
 
ScottishPower believes that its shareholders will derive significant benefits from the Merger. Before goodwill amortisation the Merger is expected to enhance earnings per share from the first full year following closing of the transaction. In addition, shareholders will continue to benefit from the successful implementation of ScottishPower's multi-utility strategy in the UK.
 
PacifiCorp has experienced a recent period of financial underperformance and management change. ScottishPower believes that it will create significant value for shareholders by transferring to PacifiCorp its proven skills in improving customer service and delivering cost efficiencies. These efficiencies will enable PacifiCorp to move more quickly towards achieving its stated aim of earning the authorised regulatory rate of return in the states where it conducts business.
 
PacifiCorp operates in an area of strong economic growth. ScottishPower will explore opportunities to access already deregulating US markets and increase the range of services PacifiCorp offers to customers.
 
ScottishPower and PacifiCorp are committed to the highest standards of customer service. Both companies recognise the importance of investing in their local communities and have extensive programmes in place to do this.
 
ScottishPower plans a share buyback of up to £500 million of its own shares in order to reach an efficient capital structure for the combined group. This is expected to take place following the approval of the Merger by both companies' shareholders, but prior to the completion of the transaction. The PacifiCorp repurchase previously announced will not be pursued.
 
Following completion of the transaction, ScottishPower intends to move to quarterly reporting and payment of quarterly dividends.
 
ScottishPower's senior management will remain in place in the enlarged group. Murray Stuart will continue to be Chairman of ScottishPower, Ian Robinson will be Chief Executive and Ian Russell will be Deputy Chief Executive and Finance Director. Alan Richardson, currently Managing Director, Power Systems at ScottishPower, will become the new Chief Executive Officer of PacifiCorp. Richard O'Brien will become President and continue as Chief Operating Officer of PacifiCorp. Keith McKennon, currently Chairman, Chief Executive Officer and President of PacifiCorp, will join the ScottishPower board as deputy Chairman, together with two non-executive directors from PacifiCorp.
 
The Merger will be conditional on approval by ScottishPower and PacifiCorp shareholders and certain regulatory and other consents. The Merger is expected to close during Autumn 1999.

Speaking of the Merger, Murray Stuart, Chairman of ScottishPower, said:
"PacifiCorp has a strong asset base, complementary to our own. We are confident that by applying the management skills we have demonstrated in our UK businesses PacifiCorp will be able to improve its operating performance for the benefit of the customers of PacifiCorp and all ScottishPower shareholders."

"PacifiCorp will also provide a strong platform for growth in the US complementing our existing opportunities in the UK. We will continue to build upon the substantial success we already enjoy in the UK, by winning new gas and electricity customers, increasing UK wide generation sales, improving the performance of our water business and investing in the rapid expansion of ScottishTelecom."

Keith McKennon, Chairman of PacifiCorp, said:
"We believe this merger is in the best interests of our customers and our shareholders. With ScottishPower, we will be able to pursue more effectively our strategy of concentrating on our core electricity business, improving efficiency and raising service levels to our customers. As part of ScottishPower we believe that PacifiCorp, our employees, customers and shareholders, have an exciting future, with the opportunity to apply the best from both of our businesses in the UK, the US and Australia."

This summary should be read in conjunction with the full text of this announcement.

In connection with the proposed Merger, ScottishPower has been advised by Morgan Stanley & Co. Limited and PacifiCorp has been advised by Salomon Smith Barney International.

Warburg Dillon Read and HSBC Securities are brokers to ScottishPower.

An analysts' meeting regarding the Merger will be held today at 9.15am at The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A 3ED.

Further Information:
Scottish Power plc                              (0171) 248 8200   (0141) 224 0303
Ian Robinson               Chief Executive
Ian Russell                  Deputy Chief Executive and Finance Director
Colin McSeveny          Media Manager
Andrew Grant             Brunswick Group
 

PacifiCorp
Keith McKennon         Chairmanm Chief Executive Officer and President
Richard O'Brien           Chief Operating Officer

For Investors
Scott Hibbs                                  (1 503) 813 7222
Angela Hult                                  (1 503) 813 7234

For Media
Leslie Carlson                                    (1 503) 813 7282
Dave Kvamme                                    (1 503) 813 7279
Howard Lee or Gavin Anderson         (0171) 457 3245

Morgan Stanley & Co. Limited, which is regulated by The Securities & Futures Authority Limited, is acting for ScottishPower in connection with the Merger and for no one else and will not be responsible to anyone other than ScottishPower for providing the protections afforded to customers of Morgan Stanley & Co. Limited or for providing advice in relation to the Merger.

Salomon Smith Barney International, which is regulated by The Securities & Futures Authority Limited, is acting for PacifiCorp in connection with the Merger and for no one else and will not be responsible to anyone other than PacifiCorp for providing the protections afforded to customers of Salomon Smith Barney International or for providing advice in relation to the Merger.