Iberdrola's Offer to Buy Out Avangrid's Minorities Is Earnings-Accretive, but Price Likely to Rise

We confirm our EUR 12 fair value estimate after no-moat Iberdrola proposed on March 6 to acquire the 18.4% of shares that it does not own in its U.S. subsidiary Avangrid for $34.25 per share in cash and implying a 10% premium over the volume-weighted average price of the last 30 days. The completion of the transaction is subject to approval by the boards of directors for Iberdrola and Avangrid as well as the majority of holders of shares not owned by Iberdrola. We don't think Iberdrola will get the latter given the lukewarm premium. Therefore, we believe that Iberdrola will likely raise its offer given its financial headroom after Avangrid terminated the agreement to acquire PNM Resources for $8.3 billion in January. In any case, the deal makes strategic sense.