US utility PPL is to acquire E.ON's UK power networks for GBP3.5bn ($5.7bn) in cash to create one of the largest electricity distributors in Britain.
Reuters reports that PPL, which beat a rival bid from Hong Kong billionaire Li Ka-Shing according to people familiar with the matter, would also assume GBP500m of debt.
The deal, expected to close in early April, would create the largest network of electricity delivery companies in Britain in terms of regulated asset value, at a combined $7.8bn, PPL said in a statement.
The E.ON business, called Central Networks, is the UK's second-largest electricity distributor and delivers power to over 5m customers. It would add to PPL's existing pool of 2.6m customers in South West England and South and West Wales.
The acquisition furthers PPL's move into steadier, regulated power provision and away from the competitive business of power generation. Units with regulated returns made up just 27 per cent of earnings in 2010, but helped by the earlier E.ON deal, were already forecast to make up half of this year's earnings.
The sale would also be an important milestone for E.ON, which is shedding some 15 billion euros of assets. It would mark the second big deal with PPL, after the latter bought E.ON's Kentucky-based power unit last year for $6.7bn in cash.
Hong Kong's Li had also pursued the E.ON assets to add Britain's second-biggest electricity distribution network to the largest, which he bought last year from EDF of France. PPL's bid succeeded because it offered a higher price, not because Li's rival bid posed bigger competition problems, a person familiar with the matter said.
Two days ago, the Sunday Times reported Li was the frontrunner after his investment arm, Cheung Kong Infrastructure Holdings, outbid PPL. But it said his bid "could be tripped up by competition concerns.
E.ON CEO Johannes Teyssen said the purchase price represents "excellent value" for the company and the proceeds of the sale would increase its financial flexibility and strengthen its balance sheet.
E.ON put the UK networks up for sale in December as part of a promise to investors that it would divest assets worth EUR15bn through to 2013, in order to guarantee minimum dividends while it builds up new markets.
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