Iberdrola: Acquisition of Electricity North West at a Decent Price; Rationale Is Strong

We confirm our EUR 12.30 fair value estimate after no-moat Iberdrola agreed to acquire Electricity North West, a UK distribution network company for an enterprise value of GBP 4.2 billion or EUR 4.9 million from private investors including Equitix and Hong-Kong-based CNIC. The deal is expected to close by second-quarter 2025, assuming Iberdrola gets clearance from the antitrust authority, which seems likely. The valuation looks reasonable to us. The deal is in line with the group's strategy to step up networks' investments with a focus on the US and UK. The UK regulatory regime is attractive due to the indexation to inflation of revenue and regulated asset value and high-growth investments approved by the regulator to ease the energy transition. Shares look fairly valued.