Spanish power company Iberdrola plans to buy regional utility owner Energy East for $4.5 billion (3.34 billion euros) in cash, giving it a foothold in the United States, the companies announced Monday.
The boards of both utilities, meeting in New York and Madrid, agreed to the deal that would give Energy East shareholders $28.50 per share, representing a 27% premium over Energy East's closing stock price Friday of $22.37.
Before the companies' announcement, Energy East shares gained 17 cents to $22.54 Monday. They climbed $4.96 to $27.50 in after-hours trading.
The deal, which is expected to close next year, requires approval by Energy East shareholders, the Federal Energy Regulatory Commission and state agencies.
"It'll be a vigorous analysis," Kurt Adams, chairman of the Maine Public Utilities Commission, said Monday evening from Canada's Prince Edward Island, where Canadian premiers and governors from northeastern U.S. states were meeting to discuss energy and the environment.
The deal is of special interest in Maine, where 80% of electric customers are served by Central Maine Power, an Energy East subsidiary.
Iberdrola, based in Bilbao in northern Spain, said the plan fits with its strategy of international expansion. New Gloucester, Massachusetts-based Energy East owns utilities in New York, Connecticut, Massachusetts and Maine.
"The combination with Energy East fits with the philosophy of our strategic plan, will serve to enhance the international expansion we initiated several years ago in markets with stable growth, and consolidates our position as one of the world's leading electricity companies," said Ignacio Galan, Iberdrola's chairman and chief executive.
If the transaction is approved, Energy East's utility subsidiaries will continue to operate under their current names: Central Maine Power, Berkshire Gas, Connecticut Natural Gas, New York State Electric & Gas, Rochester Gas and Electric, and The Southern Connecticut Gas, in addition to Central Maine Power.
Because Ibderdola's operations are managed locally, Energy East's 3 million customers from Maine to New York state would see little change in customer service, said Wes von Schack, Energy East's chairman and CEO.
The deal would represent Iberdrola's first direct purchase of a U.S. utility, Central Maine Power President Sara Burns said. Iberdrola's previous acquisition of Scottish Power gave it ownership of Oregon-based PPM Energy, which operated several wind farms in the U.S.