National Grid has announced a £4.2 billion deal that will bolster its presence in the North American gas market.
Britain's largest power network operator confirmed it will buy New-York based KeySpan - the fifth largest natural gas distributor in the US.
National Grid distributes electricity in the north-east of the United States to about 3.3 million customers and gas in upstate New York to more than 500,000 customers.
As part of the deal, National Grid - which employs around 1,500 people at its headquarters at Warwick Business Park - will also take on KeySpan's debts totalling around £2.6 billion.
Its chief executive Roger Urwin said the move, which he hopes will be completed by early 2007, was a natural extension of its business.
"It fits strategically, operationally and geographically," he said.
KeySpan has about 2.6 million gas customers in New York, Massachusetts and New Hampshire - over 90 per cent being residential and small businesses.
It also operates the electricity transmission and distribution system under a contract with the Long Island Power Authority which serves about 1.1 million people in New York.
The acquisition is subject to a number of conditions, including approval by National Grid's and KeySpan's shareholders, the company said, as well as certain regulatory and other consents and US approvals.
Gas and electricity utility companies in the United States have found themselves vulnerable to takeover approaches after Congress last year repealed a 70-year law restricting mergers in the energy sector.
The move follows National Grid's purchase of Rhode Island gas distribution assets from Southern Union earlier this month.
National Grid said the KeySpan acquisition would deliver annual savings of £115 million a year as well as opening up new opportunities in gas pipelines and storage.
The savings are expected to come from reductions in back office overlap and IT costs.
KeySpan's chairman and chief executive Bob Catell will join the National Grid board as deputy chairman.
For the year to December 31, KeySpan reported earnings before interest, tax, depreciation and amortisation of £862 million, on sales of £3.85 million.