May 28 (Reuters) - Private equity firm Energy Capital

Partners will buy Atlantica Sustainable Infrastructure ( AY )

for $2.56 billion in cash, the utility said on Tuesday, in a

deal that will give its biggest shareholder funds to lower its

debt.

Atlantica, which started a strategic review in February last

year, will get $22 per share, a near 19% premium to the closing

price on April 22, the last trading day before speculation over

the UK-based company's possible takeover started.

The price, however, is a 6.1% discount according to

Atlantica shares' closing price in the previous session. The

stock fell 7.6% in pre-market trade on Tuesday.

Algonquin Power & Utilities ( AQNB ), which holds about

42.2% of Atlantica shares, said it supports the acquisition. The

deal values Algoquin's stake at about $1.08 billion.

Last year, Algonquin started its own strategic review of its

renewable energy division, which includes the Atlantica stake,

under pressure from activist firms including Corvex Management

and Starboard Value.

"(Algonquin) expects the proceeds will be used to help

reduce debt and recapitalize its balance sheet as part of its

ongoing strategic transition to a pure play regulated utility,"

it said in a statement.

The transaction is expected to close in the fourth quarter

of 2024 or early first quarter of 2025.

Atlantica owns a portfolio of assets across the United

States, Europe, South America and Africa, dealing with renewable

energy like wind, solar and natural gas.