More than 300 shareholders gathered for a chance to fire away at top PacifiCorp officials during the company's annual meeting in Salt Lake City Thursday.
But even as they vented about the company's dismal performance of the last few years, shareholders approved a merger that executives said will move PacifiCorp toward a brighter future.PacifiCorp, parent company of Utah Power, said 87 percent of the 238 million common stock shares voted Thursday were cast in favor of its proposed $11 billion merger with British utility ScottishPower. Another 11 percent were cast in opposition to the deal, which was announced in December 1998.
Because 59 million shares were not voted, the actual total of outstanding shares voted in favor of the merger was 70 percent, the company said.
While more than 99 percent of ScottishPower shares voted were cast in favor of the merger at a meeting in Britain earlier this week, PacifiCorp chairman and chief executive officer Keith McKennon said he was satisfied with the support of his company's stockholders.
"Nobody's going to get 100 percent of any vote," McKennon said after the meeting. "I thought that was a powerful voice of support for this planned merger."
Roy Thompson is not necessarily part of that "powerful voice," but he said the meeting convinced him to support the merger.
A 37-year Utah Power and PacifiCorp employee, Thompson took early retirement as part of a recent cost-cutting plan and said he does not think the company's financial performance could get any worse.
"I'm going to weather it out with what stock I have left," he said. "It has to go up some after the merger."
Under terms of the agreement, PacifiCorp shareholders will receive 0.58 American depository shares (ADS) or 2.32 ordinary shares of ScottishPower upon completion of the merger. The ADS are traded on the New York Stock Exchange, while the ordinary shares are traded in Britain.
McKennon said many shareholders have expressed concerns about how much their stock will be worth after the merger. Although that will depend on the share prices of the two companies on the day the deal closes, he said, he is convinced the result will be a "good value" for PacifiCorp shareholders.
For example, he said, if the merger had closed using June 11 stock prices, 100 PacifiCorp shares worth $1,862.50 could have been exchanged for ScottishPower ADS worth $2,131.50.
"So there is a significant premium in the exchange," McKennon said.
He also tried to address shareholder concerns about dividends after the merger.
"ScottishPower's dividends have almost doubled since 1994, while ours have been almost flat," he said. "Dividend growth is much more likely from our merged company than from PacifiCorp standing alone."
But some shareholders were not mollified. Thomas O. Breitling said PacifiCorp has "specialized in losing money" ever since it was formed by the 1989 merger of Utah Power and Pacific Power.
"Is this another loser you're presenting us?" he asked.
McKennon said he is convinced the merged company will be more financially sound and more innovative than PacifiCorp would be on its own.
"This transaction, you will look back on and say you are glad about," he said.
Several shareholders asked whether ScottishPower planned to pursue other mergers, possibly with telecommunications companies, after the PacifiCorp deal is done.
Alan Richardson, the ScottishPower official who will be PacifiCorp's chief executive after the merger, said the company has "no plans beyond completing this merger with PacifiCorp." But after the merger, he said, it is ScottishPower's "natural instinct" to look around and see what else it could do to enhance shareholder value.
Other shareholder questions focused on PacifiCorp's poor financial performance in 1998. McKennon said the company's failed attempt to purchase Britain's The Energy Group, along with a stock price that fell about 20 percent and "disappointing" earnings, made it a bad year.
He said the company's decision to cut costs and focus on its core Western electricity business has helped turn the situation around.
But several shareholders asked for an explanation of the severance package given to Frederick W. Buckman, who led the company during the bad times before resigning his position as PacifiCorp president and CEO on Sept. 1, 1998.
According to a recent Securities and Exchange Commission filing, PacifiCorp's board had voted to give Buckman a 14.72 percent raise in May 1998. And in addition to the $939,600 in severance he received in 1998, Buckman is due to receive another $1.1 million in 1999 and $1 million in 2000.
McKennon said Buckman was paid competitively as CEO, and his severance package was based on "thoughtful decisions" about what would be fair and would avoid possible problems in the future.
PacifiCorp and ScottishPower officials also said their companies' merger remains on track to gain all necessary regulatory approvals and close by the end of the year.
The U.S. Federal Energy Regulatory Commission announced its approval of the deal Wednesday. Regulators in Washington, Wyoming, Oregon, Idaho and Utah still need to hold hearings on the merger, while those in California already gave their stamp of approval.