Avangrid share price plunges 7% after acquiring PNM Resources for $8.3bln

Shares of Avangrid (NYSE: AGR) fell about 8% on Wednesday after the subsidiary of the Spanish electric utility giant Iberdrola (BMV: IBEN) agreed to acquire PNM Resources (NYSE: PNM) for $8.3 billion including debt.

Fundamental analysis: A major deal in the energy sector

The agreed deal will create the third-largest renewable energy operator in the United States. A new company will be set up with operations across 24 states and will have a combined market value north of $20 billion, Iberdrola said. 

Board of directors at PNM unanimously agreed on the $4.3 billion offer to its shareholders of $50.3 per share, according to the filing. The deal is scheduled to close next year and Iberdrola expects to see improvements in its finances from the start.

Iberdrola and its peers have been boosted by the recent surge in interest in protecting the environment among investors and green energy goals. The deal will allow Avangrid to expand its operations outside of the U.S. northeast, including New Mexico and Texas. 

On the other hand, PNM will take advantage of Avangrid’s renewables efforts as the company attempts to reduce emissions. Iberdrola said the company agreed to shut down its coal-powered plant in San Juan by 2022. 

The newborn company will control assets worth $40 billion, produce core earnings of about $2.5 billion and net profit of $850 million.

The deal with PNM comes after seven other deals Iberdrola had this year, with the utility company investing a total of 6.6 billion euros. The company has acquired assets in France, Australia and Japan.

Technical analysis: AGR plunges

Shares of PNM Resources rose around 9% to trade close to the agreed price of $50.30. On the other hand, Iberdrola share price dropped over 2% while Avangrid stock is the biggest loser, opening over 7% lower in New York today. 

Avangrid share price printed a low of $48.95, which is around 10% lower compared to yesterday’s closing price. In case the pullback continues, bulls will look to find support near the confluence of the 100-DMA and 200-DMA around the $48 handle. 

Summary

Iberdrola’s U.S. subsidiary Avangrid agreed to pay $4.3 billion to acquire PNM Resources in a deal that will create the third-largest renewable energy operator in the United States.