By William Opalka
Iberdrola SA announced Thursday it is acquiring UIL Holdings, which has electric and gas distribution companies in Connecticut and Massachusetts, in a cash and stock deal valued at $3 billion.
The Spanish energy conglomerate will incorporate UIL’s operations into its U.S. subsidiary, Iberdrola USA.
UIL shareholders will each receive one share of Iberdrola USA and $10.50 for each of their UIL shares, giving them 18.5% of the U.S. subsidiary. Iberdrola SA will own 81.5% of Iberdrola USA, which will be traded on a yet-to-be-determined U.S. exchange.
UIL unit United Illuminating provides electric service to Connecticut’s two largest cities, New Haven and Bridgeport. UIL also owns Southern Connecticut Gas, Connecticut Natural Gas and Massachusetts utility Berkshire Gas. UIL acquired the gas units from Iberdrola in 2010 for $1.25 billion.
The deal implies a share price of $52.75, a 25% premium to UIL’s closing share price on Wednesday.
Iberdrola USA already owns New York State Electric and Gas, Rochester Gas & Electric and Central Maine Power, with a combined 3 million customers.
UIL CEO James P. Torgerson will become Iberdrola USA’s new CEO. Iberdrola said Torgerson will select a U.S.-based leadership team from among UIL and Iberdrola USA executives.
Torgerson and two other UIL directors will join Iberdrola USA’s board, which will have up to nine members.
In earnings reported two weeks ago, Iberdrola highlighted U.S. operations in New York and New England as one of its bright spots as it coped with lower Spanish subsidies for its renewable energy operations.
It is also one of the leading wind energy companies in the U.S., with operations in about 20 states.
UIL Holdings has about 700,000 customers. The deal is expected to close later this year.
The agreement, which has been unanimously approved by both companies’ boards of directors, must be approved by the Connecticut Public Utilities Regulatory Authority, Massachusetts Department of Public Utilities, Federal Energy Regulatory Commission, Department of Justice, Federal Trade Commission and Committee on Foreign Investment in the United States.
The combined company intends to invest $6.9 billion in regulated electric and gas infrastructure and other capital expenditures over the next five years.