* Offers Renovables shareholders 1-for-2 share swap
* Offers about 1-for-3 swap if special dividend approved
* To hike capital to provide new shares
* Share issue could dilute ACS stake by 4.4 percent
* Iberdrola shares suspended at 5.99 euros
* Renovables shares suspended at 2.74 euros (Updates with background, share issue, special dividend, analyst comment)
By Jonathan Gleave
MADRID, March 8 (Reuters) - Spain's Iberdrola offered to buy out the minority shareholders in its renewables unit, taking advantage of its weak share price and slightly diluting core shareholder ACS's stake.
Iberdrola is offering the holders of 20 percent of Iberdrola Renovables one newly issued share for every two they hold in the renewables unit, and one for just over three Renovables shares if a special dividend is paid.
"Since the market is not valuing Renovables' considerable project pipeline, why not buy out the minorities? It adds value for Iberdrola and the share swap costs them nothing," Intermoney analyst Alvarro Navarro said.
Navarro said he values Renovables' assets at 2.8 euros per share excluding its project pipeline, higher than Renovables share price of 2.74 euros before trading in the shares was suspended ahead of the buyout announcement.
An uncertain regulatory market for wind parks in Renovables' core markets of Spain and the United States together with low power prices have pushed Renovables shares down 14 percent in the last 12 months, according to Reuters data.
ACS STAKE SLIGHTLY DILUTED
Iberdrola's core shareholder ACS, whose repeated attempts to win a board seat for its over 20 percent stake have been rebuffed by the utility's board, will likely see its stake diluted back below 20 percent with the share issue.
Iberdrola has managed to fend off ACS, a Spanish constructor with a history of unsolicited takeovers of companies, by arguing that the builder competes in engineering and renewables.
ACS has persisted, however, in increasing its influence over Iberdrola with stake buys and legal action.
The utility has said it will back a proposal for a 1.19 euro per share special dividend for Renovables shareholders and then offer 0.29 percent of each Iberdrola share for every one of its unit's.
In the likely event that Renovables shareholders opt for the dividend and share option, Iberdrola will have to issue 247 million new shares, which would dilute ACS's stake by 4.4 percent.
Iberdrola Renovables has a free float of 842 million shares, and a market capitalisation of 11.43 billion euros. It is trading at half the price it debuted at on the Madrid stock exchange in December 2007.
Iberdrola said in a presentation the group is aiming to complete the buyout in July, adding the buyout and delisting of Renovables will generate it 20 million euros annually in cost savings, while being a short term drag on EPS growth.
Trading in its shares was suspended ahead of the announcement at 5.99 euros per share. (Reporting by Jonathan Gleave; additional reporting by Andres Gonzalez; editing by Elaine Hardcastle)