Iberdrola, Spain’s largest hydropower generator, is to buy Scottish Power of the United Kingdom, another hydropower operator, for 11.6 billion pounds (US$22.5 billion), the utilities said November 28.
The deal is to create Europe’s third-biggest utility and a world leader in renewable energy. It would have 36,603 MW of installed capacity, of which 6,040 MW is renewable energy. The two utilities have 28,000 MW of renewable energy in the pipeline.
Iberdrola’s generation includes 21 major hydroelectric projects totaling 6,895 MW, while Scottish Power’s portfolio lists nine hydro projects totaling 564 MW.
Iberdrola will keep the Scottish Power brand, with that company based in Glasgow, while the group will have its headquarters in Bilbao, Spain. Scottish Power managers will continue at the company.
Iberdrola, Spain’s second-largest utility, said it would pay 400 pence (US$7.76) in cash and 0.1646 new shares for each Scottish Power share, worth a total of 777 pence (US$15.07) a share at the November 27 close. The price includes Scottish Power’s 12 pence (23 US cents) special dividend. The value of the long-awaited bid was below the expected 800 pence (US15.52) a share.
“The new company will be a leader in the energy sector, with a more balanced business portfolio and at the head of the global wind power sector,” Iberdrola Chairman Ignacio Sanchez Galan said.
Galan said the deal also would also make it easier for his firm to merge with another Spanish utility, because it would now be subject to European regulators, which were likely to take a broader view than local regulators of it building a dominant position in the Spanish market. A proposed Iberdrola merger with Spain’s largest utility, Endesa, fell through in 2001 due to restrictions imposed by Spanish regulators.
Iberdrola said it would fund the purchase with credit worth up to 7.96 billion pounds (US$15.44 billion) backed by ABN AMRO, Barclays, and Royal Bank of Scotland. The equity part of the deal equates to 21.4 percent of its enlarged share capital.
Iberdrola plans sale of US$1.3 billion in assets
Iberdrola said it also planned to sell off more than 1 billion euros (US$1.3 billion) of its assets within a year of completion.
The bid is dependent on shareholder approval at both companies and green lights from European and U.S. regulators. Scottish Power owns Oregon-based energy marketer PPM Energy, a vestige of its former ownership of U.S. utility PacifiCorp, which it sold earlier this year. (HNN 4/11/06) Iberdrola owns U.S. renewable energy marketer Community Energy Inc. (HNN 9/4/06)
Scottish Power’s board unanimously recommended investors accept the bid at a shareholders’ meeting due in March 2007. Iberdrola expects to complete the deal at the end of April.
Some analysts said the deal could leave room for a rival bid, as Scottish Power investors might be persuaded by a lower offer if it was all cash. Germany’s RWE and Sweden’s Vattenfall had been tipped as possible rival suitors.