February 27, 2015
U.S.

Iberdrola buys U.S. power and gas distributor UIL

By Christopher Bjork and David Román | The Wall Street Journal | Feb. 26, 2015 | www.wsj.com

MADRID—Spanish power utility Iberdrola SA said Thursday it has agreed to buy U.S. power and gas distributor UIL Holdings Corp. in a cash-and-stock deal that values the company at $3 billion.

Iberdrola, which is offering a share of its U.S. unit and $10.5 for each UIL share, said it plans to fold the New Haven, Conn.-based firm into its local unit, Iberdrola U.S.A. UIL’s power and gas distribution network, with 727,000 customers, spans the states of Connecticut and Massachusetts.

The bid, which has been approved by the boards of both companies, values each share of UIL at $52.83, representing a 19.5% premium to UIL’s average share price over the past 30 days, and a 23.6% premium over its closing price Wednesday.

Once the deal has closed Iberdrola will own 81.5% of Iberdrola U.S.A. while existing UIL shareholders will own 18.5%, Iberdrola said.

Iberdrola said the deal would help implement its growth plans in the U.S. through 2016, seeking to increase the company’s local footprint and a stronger focus on regulated businesses with stable cash flows.

Iberdrola U.S.A. also has the second-largest wind power generation portfolio in the U.S.

The Spanish company, based in the industrial northern region of Basque Country, has expanded in Spain and the U.K. on a wind power-friendly strategy that has taken advantage of once-hefty subsidies for renewable energy, but suffers compressed margins there as cash-strapped governments cut down on aid for the sector.

Iberdrola U.S.A. already has nearly 3 million customers mostly in New York, New Hampshire and Maine. Including energy storage, it has more than 60 projects in 24 states, and controls Iberdrola Energy Holdings, one of the top gas storage operators and gas traders in the country with energy services trading floors in Houston and Salt Lake City.

Iberdrola is offering one share in its U.S. unit and $10.5 for each UIL share. An earlier version of this article mistakenly said Iberdrola was offering its own Madrid-listed shares as part of the deal. An earlier version of the story also reported that UIL’s asset base includes wind-power. It will be the new combined entity that will have wind power assets in its portfolio.