Spanish utility group Iberdrola SA has launched its long awaited offer for Scottish Power PLC, valuing the company at 11.6 bln stg or 777 pence a share.
Iberdrola said in a statement it has secured the unanimous backing of the Scottish Power board.
Scottish Power shareholders will receive 400 pence (5.90 eur) in cash and 0.1646 of a new Iberdrola Share, for every Scottish Power share they own.
Scottish Power American Depository Share holders will receive 1600 pence (23.61 eur) in cash and 0.6584 of a new Iberdrola Share for every ADS.
The Spanish group said its bid overall is 53 pct cash and the new shares to be issued will constitute 21.4 pct of the share base of the enlarged company.
Iberdrola chairman and chief executive Ignacio Galan said: ‘The proposed integration of Scottish Power with Iberdrola is fully in line with our respective strategies. It will create Europe’s third largest utility; it will create value for both our companies; and it will be very positive for employees and consumers, who will benefit from the competitive advantages of the new group.
Iberdrola is forecasting annual savings of 88 mln stg from the acquisition and said it expects the deal to boost earnings immediately from completion.
‘We will be able to achieve near term synergies and access economies of scale in the medium and long term through common systems and processes,’ said Galan.
‘The new group will be well positioned for the future European energy market and will enjoy a strong growth platform in Spain, the United Kingdom, Continental Europe, North America and the global market, particularly in renewable energy, a sector in which it will be a world leader.’
Scottish Power chief executive Philip Bowman hinted the deal would expand the company’s geographical presence without large-scale redundancies. While Scottish Power has demonstrated strong performance across all its businesses over the past 12 months, consolidation activity has resulted in massive change within the European utilities landscape,’ he said. ‘This transaction achieves these objectives without the adverse social consequences for employees that would be likely in most other merger scenarios.’
The merger would create the third largest utility company in Europe with a pro forma enterprise value of 43.2 bln stg and the largest global renewable energy group; total installed generation capacity on a pro forma basis of 36,603 megawatts and 21.4 mln electricity points of supply at Sept 30; and 5,707 megawatts of installed wind generation capacity and 333 MW of installed small hydro generation.
Iberdrola said it will continue to be headquartered in Spain and does not envisage changing the principal locations of Scottish Powers business in the UK and the US.
Scottish Power has agreed to pay an inducement fee of 50 mln stg if it changes its mind on backing the bid.
As part of the deal, Scottish Power will also pay a special dividend of 12 pence per share to existing shareholders. Holders of Scottish Power ADS’ in the US will receive a special dividend of 48 pence per share.