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Iberdrola to buy UIL Holdings for about $3 billion

Staff writer |
Spanish utility Iberdrola SA will buy UIL Holdings Corp for about $3 billion to create a new listed power and gas company and expand in the United States.

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Iberdrola's earnings have been hit hard by Europe's economic crisis, as well as by energy reforms in Spain, where new power generation taxes and renewable cutbacks dented profits.

As a result, Chairman Ignacio Sanchez Galan has vowed to slash domestic investments and expand abroad, especially in the United States and Mexico. The company already owns Scottish Power and U.S. Energy East, bought in 2006 and 2007, before Spain's financial crisis.

Iberdrola will combine its U.S. unit with UIL and list the new company on a U.S. exchange. The companies did not say on which exchange it would be listed. The Spanish company said UIL shareholders would receive one share in the new company for each share they own and an additional cash payment of $10.50 per share, or $597 million.

The proposed deal implies a total value of $52.75 per share, including the cash component, representing a 25 percent premium to UIL's closing price on February 25.

Iberdrola also said the deal, which is expected to boost earnings per share and cash flow, would have a limited impact on solvency and would not require a capital increase to be funded.

The new company will serve 3.1 million electric and gas customers across New York, Connecticut, Maine and Massachusetts and would invest $6.9 billion in electric and gas infrastructure over the next five years, the companies said.

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