Iberdrola SA, a Spanish utility and wind power company, said Thursday it plans to acquire Connecticut’s UIL Holdings for $3 billion.
The acquisition will combine Iberdrola’s U.S. energy companies with UIL Holdings to create a new, $18 billion electricity and natural gas business with 3.1 million customers across the Northeast. James P. Torgerson, the chief executive of New Haven’s UIL Holdings, will head the new company.
“Iberdrola is an ideal long-term partner for our customers, our employees and the communities we serve,” he said in a statement. “We will be a more diversified and stronger utility as a group with greater scale and financial resources.”
The two companies are well-acquainted business partners. In 2008, Iberdola made a large push into the U.S. market in its $4.5 billion deal to buy Southern Connecticut Gas, Connecticut Natural Gas and other New England utilities.
In 2010, Iberdrola sold the Connecticut gas companies as well as Berkshire Gas to United Illuminating. The Spanish company said the deal was to maintain financial strength and raise capital to make necessary investments around the region.w
On Thursday, Iberdrola and UIL Holdings put forward a deal that would everyone back together.
The unnamed, new company will include UIL Holdings’ United Illuminating, Berkshire Gas, Connecticut Natural Gas, and Southern Connecticut Gas, as well as Iberdrola’s New York State Electric & Gas, Rochester Gas & Electric and Central Maine Power.
It will also have the second largest operating wind power portfolio in the United States, behind Nextera Energy.
The combined company would have a $8.3 billion of investments in pipes, poles, wires and equipment for its electric and gas systems throughout the Northeast. The pro-forma company would have reported $555 million in net income and assets of $30 billion in 2014.
Togerson said nearly all of the company’s profits will come from stable regulated businesses or contracted power agreements. “We don’t have to worry about the vagaries of the market,” he said.
The new company combines the 2,000 workers employed by UIL Holdings with about 5,000 of Iberdrola’s U.S. workers; about 3,300 of the total are union employees. The company will continue to have its headquarters in New Haven, Torgerson said, and it will honor all existing labor contracts.
The deal, subject to regulatory approvals, values UIL Holdings shares at $52.75, a 25 percent premium from what they were traded before the transaction was announced. Shares of UIL Holdings jumped 21 percent to $51.27 in morning trading on the New York Stock Exchange.
Current Iberdrola shareholders will own 81.5 percent of the new company, and UIL Holdings shareholders will own 18.5 percent. Three of the 12 members of the new company’s board of directors will be from UIL.
Iberdrola said it expects the deal to be completed in five to eight months. State regulators in Connecticut and Massachusetts and federal energy and investment authorities will review the deal.
The announcement comes two months after UIL Holdings officially stopped pursuing its offer for Philadelphia Gas Works, the largest municipally owned gas utility in the United States. Members of the Philadelphia City Council had issues with that acquisition and never brought it to a required approval vote.
