ScottishPower agrees £12bn takeover with Spanish suitor Iberdrola

ScottishPower, the UK's fifth-biggest energy company, will today announce an agreed £12bn takeover bid from Iberdrola of Spain. The offer is understood to be pitched at around 800p and will be roughly half in cash and half in shares.

The deal is the latest in a series of takeovers of UK utility companies and will leave the UK with only two big quoted energy suppliers, Centrica and Scottish & Southern Energy.

Iberdrola, Spain's third biggest energy company, approached ScottishPower three weeks ago, since when talks have made rapid progress.

The company had been expected to mount an all cash offer because a number of UK institutional shareholders will not be able to accept Spanish shares. The decision to fund the deal with cash and shares will therefore come as a surprise.

The takeover comes less than a year after Philip Bowman, the former head of the spirits group Allied Domecq, was drafted in to run ScottishPower following the ousting of its former chief executive Ian Russell. Mr Bowman stands to collect a multimillion pound pay off if the Iberdrola deal goes through.

The Spanish company's bid may yet flush out other suitors, although dealers said that at 800p Iberdrola would be paying a full price. ScottishPower shares closed last night at 746p.

The company has 5.3 million domestic customers and a thriving US wind power business. It is not clear whether Iberdrola will keep ScottishPower intact or break it up. There have been reports that it might sell off the US business to a private equity partner.

If the deal goes through it will be the latest in a series of Spanish takeovers of UK companies. BAA, the airports operator, was bought this year by Ferrovial of Spain and in recent years Abbey National and the mobile phone network O2 have also fallen into Spanish hands.