The move will make the group the first UK electricity generator to have a significant presence in the US.

It will also be the largest takeover of a major US utility by a foreign company.

The new group, to retain the name ScottishPower, will be based in Glasgow, with its primary listing in London.

Pacificorp shareholders will own around 36% of the new group, with ScottishPower shareholders owning the remaining 64%.

ScottishPower deputy chief executive and finance director Ian Russell said "We believe this merger will deliver significant value to our shareholders in several ways. We intend to deliver value by the two routes of reducing costs and exploiting growth."

Workers will have to wait for news about the effect of the deal on their employment as Mr Russell said it was too early to outline the scale of any job losses.

Shares in ScottishPower fell sharply on news of the deal. BY 1235 GMT they were 31p lower at 644p.

US ambitions

. ScottishPower, which also owns Manweb and Southern Water, has been looking to diversify outside of the UK for some time. In its interim report, the company said it was "exploring opportunities for international investment, particularly in the US energy sector".

Earlier this year, it failed in attempts to merge first with Florida Progress, owner of Florida Light & Power, and then with Cinergy of Ohio, after disagreements over management control.

The merged group will have seven million customers, including 1.5 million in seven states on the US's booming west coast.

ScottishPower also owns Demon, the biggest UK-owned Internet Service Provider.

Pacificorp vulnerable

It has been Pacificorp's own failure to get in to the UK energy market that has left it vulnerable to a takeover.

In April it lost a battle with Texas Utilities for control of British company Energy Group.

The chief executive, Fred Buckman, then resigned, and has been replaced by a caretaker chairman Keith McKinnon.

Since then, its earnings has plummeted and its stock price has fallen, making it vulnerable to a bid.

Other UK rivals going West

Scottish Power is not the only UK power company that wants to get into the newly-deregulated US utilities market.

Earlier this year, PowerGen failed to negotiate a merger with Houston Energy, while both National Power and National Grid have been looking for US partners for some time.