Germany’s E.On to get $5.6 billion cash; buyer to also assume debt
By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch) — PPL Corp. said Wednesday it’s agreed to buy electricity-distribution assets in the U.K., a deal that would expand its footprint of power lines by 83,000 miles and add 5 million customers.
“Opportunities as compelling as this do not come along very often,” said James Miller, Allentown, Pa.-based PPL’s chairman, president and chief executive, in a statement.
Terms call for PPL Corp. (PPL 25.74, +0.84, +3.37%) to pay Germany’s E.On AG (DE:EOAN 23.25, -0.16, -0.66%) (EONGY 32.22, +0.12, +0.37%) a total of $5.6 billion in cash and assume $800 million in debt.
The deal for the Central Networks business will increase PPL’s 2011 earnings target by 10 cents to 15 cents a share, to a range of $2.50 to $2.75 a share, the company said.
Ahead of the deal, analysts have pegged PPL’s yearly earnings at $2.52 a share, according to the consensus in a survey by FactSet Research.
PPL said it hopes to close on the transaction in early April. It requires no regulatory or shareholder approvals.
Together with its existing ownership of Western Power Distribution, which serves 2.6 million customers including the cities of Cardiff and Bristol, PPL stands to become the operator of the largest electricity network in the U.K.
The 5 million additional customers are in the cities Birmingham, Derby and Nottingham, as well as the surrounding areas, the company said.
Said Miller: “The U.K. provides a progressive regulatory environment; Central Networks is adjacent to our existing, high-performing operations; and there are very real opportunities for retainable synergies that further enhance what already is a compelling transaction.”
Looking ahead, PPL projected the transaction will add to earnings by 32 to 38 cents a share by 2013.
PPL entered into a previous deal with E.On last year, when it bought regulated utility services in Kentucky.
PPL said it obtained a financing commitment for the Central Networks deal from Bank of America (BAC 13.97, +0.04, +0.29%) . The financing, which has been reviewed by debt-rating agencies Moody’s and Standard & Poor’s, includes common equity, convertible equity units and debt.
PPL plans to complete the permanent equity financing in the second quarter and the debt financing by the end of the year.
Credit Suisse (CS 45.75, +0.51, +1.13%) and Bank of America Merrill Lynch advised PPL on the deal.
