Spanish utility Iberdrola is to acquire 100% of US utility Energy East after the proposed plan was backed by its board of directors. The transaction is valued at E3.4 billion, which added to a debt of E3 billion, gives Energy East an enterprise value of E6.4 billion, Iberdrola said.
The friendly transaction, which will be effected via a merger of Iberdrola’s US subsidiary Green Acquisition Capital into Energy East, values each Energy East share at $28.50 (E21.08) and the ordinary share capital at approximately $4.5 billion (E3.4 billion).
This represents a premium of 20.2% over the average share price of the company over the past 30 days, and 27.4% over the closing price on June 22, 2007, Iberdrola said. The company has not yet decided how to finance the acquisition.
The agreement is subject to approval by the shareholders of Energy East. Due to the fact that Energy East and its subsidiaries operate in a regulated sector, the relevant authorizations will be required. This process is expected to be completed during 2008.
Iberdrola chairman and CEO Ignacio Galan said: The US represents an important opportunity for growth, and the acquisition of Energy East is a step forward in our strategy of building an Atlantic platform.
Wesley von Schack, chairman and CEO of Energy East, added: While Iberdrola is a global energy company, its operations are managed locally; I’m therefore delighted to assure Energy East’s three million customers that they can continue to rely on the same local people whom they’ve come to know and trust to provide exceptional customer service.
Energy East and its subsidiaries are involved in the production, distribution and sales of electricity and natural gas in five states in the northeast of the US: New York, Maine, Massachusetts, New Hampshire and Connecticut.
In 2006, Energy East distributed a total of 40,450GWh, and the company has a generation capacity of 555MW. Both companies have pledged to work on local energy issues, in particular renewable power generation.