Utility company PPL Corp. (PPL) said Tuesday it has agreed to acquire German utility giant E.ON AG's (EONGY.PK) U.K. power distribution network for GBP 4 billion or $6.4 billion. The Central Networks business is the second-largest electricity distribution network operator in the U.K.
Allentown, Pennsylvania-based PPL will acquire the business for GBP 3.5 billion or $5.6 billion in cash and the assumption of GBP 500 million of existing public debt, in addition to adjustments on intercompany indebtedness through the closing date. The companies expect the transaction, which does not require regulatory or shareholder approval, to close in early April.
PPL outbid Hong Kong tycoon Li Ka-shing, who was earlier reportedly close to securing a deal for the business. Li's investment arm Cheung Kong Infrastructure Holdings Ltd. or CKI already owns 39 percent of the unit. MidAmerican Energy Holdings, owned by Warren Buffett's Berkshire Hathaway Inc. (BRKa), was also said to have been a suitor for the business.
E.ON said in November last year that it intends to raise about 15 billion euros through divestments by the end of 2013 as part of its efforts to cut debt and expand in growth regions outside Europe. Accordingly, the company put its U.K. unit for sale in December.
Central Networks' regulated distribution operations serve 5 million customers in the Midlands area of England and is responsible for the operation of about 83,000 miles of lines in an area comprising central England, including the cities of Birmingham and Nottingham.
PPL currently owns a distribution business, Western Power Distribution or WPD, which supplies electricity to 2.6 million customers in Wales and southwest England. After completing the E.ON unit acquisition, PPL will own and operate the largest network of electricity delivery companies in the U.K. in terms of regulated asset value, at a combined GBP 4.9 billion. Robert Symons, chief executive of WPD, will lead the expanded network operation.
PPL estimates the acquisition will add about 10 to 15 cents per share to its earnings in 2011, assuming the transaction closes in April. Following closing of the transaction, PPL expects to increase its 2011 earnings forecast to a range of $2.50 to $2.75 per share from the current $2.40 to $2.60 per share. In addition, the company estimates the accretive value of the transaction will grow to 32 to 38 cents per share by 2013.
PPL plans to maintain its common stock dividend at the current annualized level of $1.40 per share, as declared by the company's board of directors on February 25.
The deal is PPL's second large purchase from E.ON in the past year. In the U.S., PPL acquired Louisville Gas & Electric and Kentucky Utilities units from E.ON last year for $7.6 billion, including assumed debt.
PPL closed Tuesday's trading at $24.90, down $0.53 or 2.08 percent on 12.80 million shares. EONGY.PK last traded at $32.10, down $0.75 or 2.28 percent on a volume of 89,292 shares.
by RTTNews Staff Writer
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