Scottish Power PLC said Tuesday it has agreed to a $22.5 billion buyout offer from the Spanish utility Iberdrola SA that would create one of Europe’s biggest utilities.
But the bid of 11.6 billion pounds in cash and stock was lower than some had expected, and analysts said it opened the possibility of a rival bid.
“The combination of part cash and part Iberdrola shares just convolutes the offer somewhat,” said Martin Slaney, an analyst at GFT Global Markets.
Iberdrola offered $7.75 (400 pence) in cash and 0.1646 new Iberdrola shares for every Scottish Power share, the company said in a statement. That meant the offer was equivalent to $15.06 (777 pence) per share.
Slaney said speculation had been the bid would be as much as 12 billion pounds, or 800 pence a share.
Iberdrola said the deal could result in cost savings of as much as $170 million a year and Chairman Ignacio Sanchez Galan said Iberdola intends to sell assets worth more than $1.2 billion in the year after the deal is completed.
Jack McConnell, first minister of Scotland’s regional government, expressed wariness, and said he would seek assurances from the European Union that the takeover would preserve competition.
“Today’s announcement will be of concern to Scottish consumers and the employees of Scottish Power,” McConnell told reporters, refusing to say whether he regarded it as good or bad for Scotland.
McConnell said he would seek assurances from European Commission President Jose Manuel Barroso that the EU would evaluate the takeover consistent with its competition rules.
The takeover is to be completed by April, and Iberdrola is planning to issue 245 million new shares to finance the deal, director for corporate development Jose Luis del Valle told analysts on a conference call.
Iberdola’s Galan reiterated Iberdrola’s target of paying a dividend of $1.97 (1.50 euros) per share in 2009.
Analyst Andrew Moulder of New York-based Creditsights commented that it was “hard to see a compelling rationale for the tie-up.” The key to the deal, he said, is the development of the renewables business.
Iberdrola said the combined company would be a leading producer of renewable energy, with installed capacity of 5,707 megawatts of wind generation and 333 megawatts of hydroelectric power.
The Spanish company, based in Bilbao, has business operations in gas and electricity in 28 countries. In 2005 Iberdrola reported revenue of $15.4 billion (11.738 billion euros) and operating profit of $2.97 billion (2.26 billion) euros.
Scottish Power supplies gas and electric services to more than 5.2 million homes and businesses in the United Kingdom, and operates electricity generation and gas storage facilities in Britain, the U.S. and western Canada.
In March, Scottish Power completed the sale of its U.S. unit, PacifiCorp, to Warren Buffet’s Berkshire Hathaway Inc. for $5.1 billion in cash. Berkshire Hathaway also assumed $4.3 billion in debt.
Scottish Power reported earlier this month that its net profit dropped 21 percent to $345.1 million (180.8 million pounds) in the first half while revenue gained 23 percent.