Siemens ACquire Dress-Rand Group, Iberdrola Follows Suit

Mr Galan, the Chairman of Iberdrola intends to trim investment in Spain and expand overseas. It may be noted that Siemens AG (ADR) (OTCMKTS:SIEGY), the German engineering company, also agreed to acquire Dress-Rand Group Inc, the American turbine maker, for $7.6 billion in 2014.

As per Iberdrola statement, the deal would boost its cash flow and earnings per share (EPS) without having much impact on its debt, as no additional funds will be required to fund the deal. It would also aid the company in implementing its growth plans through 2016 in the US.

The largest wind energy provider, Iberdrola, will also acquire the second-largest wind power producing assets of the US, which come under UIL portfolio. Iberdrola is operating in 60 projects in 24 states.

The Spanish energy giant already has approximately three million customers in Maine, New Hampshire and New York. The acquisition of Connecticut-based UIL will add 3.1 million gas and electric customers for Iberdrola in Massachusetts and Connecticut. Iberdrola plans to spend $6.9 billion in gas and electric infrastructure till 2020.

The largest Spanish electricity company, Iberdrola SA , has announced that it will buy UIL Holdings Corporation, a gas and power distributor company, in a $3 billion cash and stocks deal, as the company intends to offset its declining earnings at home by expanding in the US.    

According to the deal, shareholders of UIL will receive $52.75 per share, which consists of $10.5 ($597 million) in cash and rest in new company’s stock. For every one share of UIL, a shareholder will receive a share of the newly formed company. The total value of the offer is a premium of 24.6% to closing price of UIL on 25th February.

UIL shares soared 8.68% to $51.01 before the market opened on Thursday, while shares of Iberdrola rose 1.17% to $6.12 at Bosla de Madrid (BME) as per 3.51PM CET. 

“The operation that integrates Iberdrola USA and UIL is consistent with our strategy of growth in this country, a key market in which we are taking a major step forward,” Igancio Galan said in a press release. "It also reflects our preference for effecting corporate operations on a friendly basis,” said Galan.

Iberdrola, along with other European countries, intends to expand outside its home country, where sluggish growth, currency headwinds and economic crisis in the Eurozone have impacted the earnings of the company. Moreover, the Spanish reforms on energy sector are too harsh, as the earnings of companies are dented on renewable cutbacks and heavy new power generation taxes.

Iberdrola also said that the deal, which is expected to be finalized at the end of 2015, will have 81.5% stake of Iberdrola USA, while the shareholders of UIL will have 18.5% stake. CEO UIL, James Torgerson, will be the CEO of the new company.