NEW YORK, June 16 (Reuters) - A New York administrative law judge recommended on Monday that state regulators disapprove Iberdrola SA's (IBE.MC: Quote, Profile, Research, Stock Buzz) $4.5 billion takeover of U.S. utility Energy East Corp (EAS.N: Quote, Profile, Research, Stock Buzz), saying the deal is not in the public's best interest.
New York's Public Service Commission -- regulators who oversee the state's utilities -- could kill the deal by not approving it.
"The commission should disapprove the transaction precisely because its lack of potential synergies or other benefits (when combined with the attendant risks) means that disapproval would avert a net detriment rather than forfeit an opportunity," Administrative Law Judge Rafael Epstein wrote in his decision.
Should the commission approve the deal, Epstein recommended it be subject to several preconditions. This would include nearly $650 million of positive benefit adjustments for Energy East customers in New York.
The Department of Public Service's staff, which advises the commission, has also opposed the acquisition, saying the deal's potential benefits are insufficient to satisfy the state's public interest standard.
Utility mergers in the United States are notoriously difficult to complete, often requiring the parties to receive approvals from state as well as federal regulatory agencies.
If the commission votes down the merger, it would become the latest in a line of high-profile utility deals to fall victim to local politics, which includes Exelon Corp's (EXC.N: Quote, Profile, Research, Stock Buzz) bid for Public Service Enterprise Group Inc (PEG.N: Quote, Profile, Research, Stock Buzz) and FPL Inc's (FPL.N: Quote, Profile, Research, Stock Buzz) scuttled acquisition of Constellation Energy Group Inc (CEG.N: Quote, Profile, Research, Stock Buzz)
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