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Iberdrola Initiates Negotiations For Merger With Renovables Subsidiary

08/03/2011

The Board of IBERDROLA has today made the proposal to the subsidiary, which will analyze it over the next few days

Attractive conditions proposed for transaction structure and pricing:

  • 16.7% premium over average share price of past 6 months (€2.978 per share)

  • 2.7% premium over exchange equation at time of original share launch

  • Iberdrola will vote in favour of the distribution of a special extraordinary Iberdrola Renovables (IBR) dividend, equal to 40% of the offer value, to be proposed by the IBR Board to a shareholders meeting

  • The final exchange ratio, in the event the dividend is approved, will thus be 0.299 Iberdrola shares per IBR share

  • Renovables shareholders will receive Iberdrola shares, a strong stock with high liquidity and attractive dividend yeld

The merger will retain Iberdrola Renovables as a separate business unit with headquarters in Valencia

The integration will enable IBERDROLA to maintain projected investments in Renovables business

The transaction is expected to close in the first two weeks of July 2011

The Board of Directors of IBERDROLA, meeting today in Madrid, has agreed a proposal to the Board of IBERDROLA RENOVABLES which met this afternoon in Valencia, to initiate negotiations for a merger by absorption of the renewables subsidiary by the parent.

IBERDROLA has proposed an operation equivalent to 0.499 of its own shares for each IBERDROLA RENOVABLES share, valuing the subsidiary at €2.978 per share or a 16.7% premium over its average share price for the last six months.

The operation will involve IBERDROLA voting in favour of the distribution of an extraordinary dividend to be proposed by the Board of the subsidiary at a shareholders meeting, provided the amount is equivalent to 40% of the stated share value of €2.978.
 
In the event of the dividend obtaining approval, the exchange ratio would be modified to 0.299 IBERDROLA shares per subsidiary share. For this purpose, the parent company would raise capital by €246.6 million.

The merger by absorption proposed today by IBERDROLA improves the ratio at the time of the original IBERDROLA RENOVABLES share offer in December 2007, with a premium of 2.7%, and will give existing IBR minority shareholders access to a solid stock with high liquidty and attractive dividend yield.

Through the proposed transaction, IBERDROLA seeks to extract value from IBERDROLA RENOVABLES that has not been reflected in its share price since the flotation, with its continuing development as an independent business unit headquartered in Valencia.

The transaction closing, following approval by the respective Annual Shareholders Meetings, is expected in July.

IBERDROLA has been advised by Citigroup and HSBC, with legal advisers Uría Menendez Abogados S.L.P.

The World’s  Leading Wind Power Company

IBERDROLA RENOVABLES has a presence in 23 countries and is world leader in its sector, both in installed capacity with more than 12,530 MW operational at the end of 2010, and also in production with more than 25,400 million kWh last year.

The company has a market capitalization of €11,435 million at the close yesterday’s close. Last year it obtained Ebitda of 1,456 million and net earnings of €360 million.

* Source: Bloomberg New Energy Finance

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