Grid to buy Lattice for $18 billion

LONDON, England (CNN) -- National Grid Group, monopoly owner of the electricity grid in England and Wales, has agreed to buy Lattice Group for £12.5 billion ($18 billion) in stock and debt.

National Grid's acquisition on Monday gives it control of Britain's natural-gas transportation system.

The combined group, to be called National Grid Transco, will be Britain's largest energy utility with a market value of about £14.8 billion.

Under the terms of the agreement, Lattice (LAT) shareholders will get 0.375 new National Grid Transco shares for each Lattice share. That values each Lattice share at about 183.75 pence, a 6.4 percent premium to Friday's close.

Lattice's stock stormed up more than 12 percent to 193.6 pence in early London trading on Monday, while National Grid, which will own 57.2 percent, of the new company, rose 2.8 percent to 504 pence.

Europe's utility markets is undergoing a flurry of takeovers with British companies falling prey to their continental peers. Innogy, Britain's biggest electricity supplier, agreed to a £3.1 billion takeover by Germany's RWE last month.

RWE's German rival E.ON and Electricite de France, the state-owned power utility, have spent billions of euros snapping up companies from Spain to Poland as European markets deregulate and regulators reign in their ability to make excessive profits from consumers.

National Grid's latest deal could raise concerns among consumer groups and regulators but the Grid's executives said the UK energy regulator and UK Office of Fair Trading had raised "no reservations in principle."

Lattice Finance Director Steve Lucas told reports that the combined power house would use its financial muscle and expertise to build on the Grid's existing U.S. operations.

"We expect to have sufficient credit capacity for a material acquisition (in the United States)," although there are no plans to add assets to the Grid's existing North East United States power assets.

Lattice Group was spun off from BG Group (BG-), formerly British Gas, two years ago. National Grid (NGG) was created in 1990 when the UK opened its electricity and gas markets up to competition.