The US unit of Iberdrola has signed a $3bn deal to buy UIL Holdings and create a new publicly-traded entity.

The acquisition will entitle the UIL shareholders to receive $52.75 for each of the existing shares. Out of this sum, $10.50 will be in cash consideration and the rest in stock. It also includes nearly 25% premium on UIL shares’ closing price.

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UIL president and CEO Torgerson said: "The combination will be immediately accretive to UIL’s cash flow profile and includes a $10.50 cash payment for each share currently owned.

"Shareholders will also participate in the future upside prospects of the combined company, which is enabled by leveraging its balance sheet strength to pursue additional investment opportunities in the North East and across the US.

"The acquisition will entitle the UIL shareholders to receive $52.75 for each of the existing shares."

"This includes a highly attractive renewable energy development portfolio."

The new entity plans to invest $6.9bn within five years in regulated power and gas infrastructure.

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The diversified power and utility firm will have an approximate rate base of $8.3bn and will include a 6.5GW portfolio, primarily constituting renewable sources.

Approvals for the agreement have been secured from boards of both the companies. It is expected negotiations will close this year.

Iberdrola chairman Ignacio Galán said: "The transaction, which integrates Iberdrola USA and UIL, is consistent with Group strategy and creates a significant company in the US.

"This a key market in which we are taking a major step forward. It also reflects our preference for effecting friendly corporate transactions."