British Firm Agrees to Buy PacifiCorp

Scottish Power, aiming to become the first foreign company to buy a major U.S. utility, said Monday it agreed to pay about $7.8 billion in stock for PacifiCorp.

The deal, which values Portland, Ore.-based PacifiCorp at about $12.8 billion including the assumption of about $4.9 billion in debt, comes amid rapid consolidation in an industry being deregulated around the world. It also follows PacifiCorp’s own failed bid to acquire a British utility, Energy Group, earlier this year.

The merged company would have sales of about $11.4 billion and would be the world’s 10th-biggest utility ranked by its stock market value of $19.6 billion.

“They made us what I believe is a terrific offer for our shareholders. We are teaming up with a world-class outfit,” PacifiCorp Chairman Keith McKennon said.

The new company, to be called Scottish Power, would have 7 million customers and 23,500 employees worldwide. The companies said there will be some job cuts but did not elaborate.

But some analysts said that possible objections from regulators could hamper the proposed deal or that another bidder might emerge.

The deal must be approved by the states where PacifiCorp provides retail power--Idaho, Oregon, Utah, Washington and Wyoming. The firm is selling its service operations in California and Montana.

But analysts said Scottish Power’s track record for keeping costs low should sit well with regulators and consumers.

Scottish Power has agreed to become a public utility in the United States, analysts said, in order to circumvent Securities and Exchange Commission rules prohibiting foreign ownership of American utilities.

McKennon said he expects regulatorary approval, with completion of the deal late next year.

Scottish Power shareholders would own 64% of the new company, which would remain based in Glasgow, Scotland. Scottish Power would exchange 0.58 of each American share, or 2.32 ordinary shares, for each PacifiCorp share.

Reflecting investors’ uncertainty about the deal, Scottish Power’s U.S. shares fell $3.75 to close at $40.88 on the New York Stock Exchange, which would value each PacifiCorp share at $23.71. PacifiCorp fell 19 cents to $20.56, also on the NYSE.

Scottish Power has 5 million customers in Britain.