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Spain's Iberdrola to Acquire UIL Holdings for $3B

Spain's Iberdrola SA plans to acquire UIL Holdings Corp. in a cash and stock deal valued at about $3 billion, creating one of the larger utility companies in the United States and supplying natural gas customers in Connecticut and Massachusetts.

Iberdrola said Thursday its board of directors, as well as that of subsidiary Iberdrola USA, had approved a merger recommended by their counterparts at UIL. Under the terms of the deal, UIL shareholders will receive 18.5% of the share capital from the combined company, plus $597 million in cash -- effectively a 19.5% premium over the average UIL share price during the 30 days prior to Wednesday (Feb. 25).

Data from the New York Stock Exchange (NYSE) shows UIL closed at an average $44.73/share during the aforementioned 30-day period. With 56.85 million shares outstanding and an additional $8.72/share for the premium, the deal amounts to $3.04 billion. Shares of UIL were trading at $50.52/share in midday trading Thursday.

The combined company, Iberdrola USA, would be listed on NYSE, with Iberdrola SA owning 81.5% and UIL shareholders owning the remaining 18.5%. The agreement, which is subject to approval by UIL shareholders and regulators, is expected to close in 2015.

In a twist, New Haven, CT-based UIL acquired three natural gas utilities -- Southern Connecticut Gas Co. (SCG), Connecticut Natural Gas Corp. (CNG) and The Berkshire Gas Co. -- from Iberdrola SA for nearly $1.3 billion in cash, less net debt of $411 million, in 2010 (see Daily GPI, May 26, 2010). The three gas utilities currently serve a combined 395,832 customers, all in Connecticut and Massachusetts.

Last December, UIL abandoned plans to acquire Philadelphia Gas Works (see Daily GPI, Dec. 5, 2014).

On Thursday, Iberdrola said the combined company would have a pro forma EBITDA (earnings before interest, taxes, depreciation and amortization) of about $2 billion, net income of $570 million, 3.1 million points of supply and around 6.7 GW of installed capacity.

Iberdrola USA has three business units and operations in 24 states, including Alabama, Arizona, California, Colorado, Illinois, Iowa, Kansas, Maine, Massachusetts, Minnesota, Mississippi, Missouri, New Mexico, New Hampshire, New York, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Texas, Washington and Wyoming.

The first unit, Iberdrola USA Networks, delivers natural gas and electricity to 3 million customers in Maine, New Hampshire and New York. Iberdrola Renewables LLC, the second unit, is the second-largest wind operator in the U.S. and also operates more than 621 MW of gas-fired generation and more than 129 Bcf of owned and contracted U.S. natural gas storage.

The third unit, Iberdrola Energy Holdings LLC, is a holding company for Iberdrola SA’s natural gas business operations in the U.S. The operations include Iberdrola Energy Services LLC and Enstor Inc., which perform gas trading and gas storage, respectively. The unit is one of the top independent gas storage operators and traders in the U.S., with more than 130 Bcf of gas storage and energy services trading floors in Houston and Salt Lake City.

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