PPL Corporation announced that it will sell Western Power Distribution, its U.K. utility business, to National Grid for £7.8 billion (or $10.53 billion) in cash. Meanwhile, in a separate transaction, it has agreed to acquire National Grid’s Rhode Island utility business, The Narragansett Electric Company, for $3.8 billion.
The move reflects PPL Corporation’s (PPL) increased focus on the high-growth domestic utility market. The net proceeds from the transaction after deducting taxes and fees are expected to be $10.2 billion.
Following the completion of both transactions, PPL would have approximately 3.5 million electricity and gas customers across the US. The total figure includes about 780,000 customers of Narragansett Electric Company. (See PPL stock analysis on TipRanks)
The sale of Western Power Distribution is likely to close within four months while the buyout of Narragansett Electric Company is expected to be completed within a year.
Following the announcements, Mizuho Securities analyst Anthony Crowdell raised the stock’s price target to $30 (1.4% upside potential) from $29.50 and reiterated a Hold rating. In a note to investors, Crowdell stated that the transaction multiples are almost in-line with his assumptions, and therefore he sees PPL stock as fairly valued.
Turning now to the rest of the Wall Street community, PPL has a Moderate Buy consensus rating based on 2 Buys and 4 Holds. The average analyst price target of $32.50 implies upside potential of about 9.8% to current levels. Shares have rallied 37% in one year.
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