WGL Weighs Sale After Interest From Spain’s Iberdrola

  • Companies said to hold preliminary talks, no deal reached
  • Natural-gas providers became prime targets in recent years

WGL Holdings Inc., the parent of natural-gas utility Washington Gas, is weighing options including a sale after receiving takeover interest from Spain’s Iberdrola SA, according to people familiar with the matter.

The Washington D.C.-based company has held preliminary talks with Iberdrola, said the people, who asked not to be identified because the matter is not public. No agreement has been reached and no deal is imminent, they said. WGL, which is working with financial advisers, may also decide to remain independent, they said.

WGL’s shares rose as much as 11.9 percent Tuesday to $77.25, giving the company a market value of about $3.9 billion. It has more than $1.5 billion in debt, according to data compiled by Bloomberg.

Representatives for Iberdrola and WGL declined to comment.

Regulated, natural-gas providers such as WGL have become prime takeover targets in the past two years, as large utilities bulk up and diversify to offset stagnant electricity demand and rising infrastructure costs. Dominion Resources Inc., Duke Energy Corp. Exelon Corp. and Southern Co. have all recently announced takeovers of gas-oriented utilities, which are growing faster than electric utilities.

Iberdrola’s U.S. division closed a $3.1 billion purchase in December of electric and gas utility UIL Holdings Corp., a transaction that created Avangrid Inc., a publicly traded utility in which the Bilboa-based company owns a more-than 80 percent stake. It’s not clear if Iberdrola approached WGL directly or through Avangrid.

Iberdrola’s shares are down about 13 percent this year through Tuesday to 5.72 euros, giving it a market value of 36.4 billion euros ($38.6 billion). New Gloucester, Maine-based Avangrid is valued at about $11.7 billion.

Washington Gas, WGL’s main subsidiary, has more than 1.1 million customers in Washington D.C., Maryland and Virginia, according to regulatory filings. WGL’s other divisions include a gas-storage business, a gas and electricity marketing arm, and a natural-gas pipeline unit.

Exelon closed its $6.8 billion purchase of WGL rival Pepco Holdings Inc. in March, a deal that took almost two years for regulators in Washington D.C. to greenlight. The drawn-out approval process Exelon faced to close that deal could dissuade other potential buyers from pursuing WGL, the people familiar with the matter said.

— With assistance by Rodrigo Orihuela

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE