Iberdrola to acquire US-based PNM Resources in all-cash $4.3bn deal

Iberdrola's US unit Avangrid will acquire competitor PNM Resources to grow its footprint in the world's largest economy, possibly ahead of a structural shift by Washington towards green energy.

It was the eighth M&A deal year-to-date of Iberdrola's €10bn expansion strategy which had already seen it buy assets in Australia, France, and Japan.

The all-cash transaction valued PNM at an enterprise value of approximately $4.3bn or $50.3 per share, for a 10% premium against the shares' closing price from the previous session.

Following transaction close, the Spanish renewables energy group would have a presence in 24 out of 50 US states, with PNM focused on New Mexico and Texas.

In 2019, the combined group's installed capacity was roughly 10.9GW, alongside 168,000 kilometres of transmission and distribution lines.

Together, the two companies would have made $3.41bn of net profits in 2019, clocking in with a combined $41.1 of net debt and $48.7bn of total equity.

PNM posted net income of $173m last year with net debt standing at about $3.2bn.

In a presentation posted to its website, Iberdrola said the purchase was a part of its stated strategy of growing in regulated and renewables businesses and of increasing its exposure in countries with highly-rated sovereign debt of 'Aaa' quality.

With the "appropriate capital structure", the transaction would be more than 3% accretive to earnings per share starting from the first year.

Iberdrola also stated its intention to accelerate its exit from coal to 2022, adding that the purchase of PNM would not affect the group's liquidity position of roughly $14bn.

Clearance for approval from the multiple US state and federal regulators was expected to take between one and 18 months to obtain from the date of filing.

As of 1014 BST, shares of PNM Resources were 7.83% higher to $49.32 in after-hours trading in the States, while stock in Avangrid was down 1.09% at $53.47 and that of Iberdrola by 1.28% to €10.83 but still just below levels last seen over a decade before.