Spain's Endesa Says Germany's E.ON Takeover Bid Too Low
February 22, 2006
"The board considers that it (the offer) does not adequately reflect the true value of Endesa," the company said, while still welcoming the fact "the operation proposed by E.ON maintains the integrity of Endesa's industrial project, without offloading shares."
The bid came after the Spanish government had on Feb. 3 given its blessing to a rival bid from Spanish utility Gas Natural, which was 29 percent lower than E.ON's at 22.5-billion euros.
Gas Natural responded to E.ON's entrance into the fray by saying it was continuing with its bid.
Spanish Prime Minister Jose Luis Rodriguez Zapatero threw the bid into further doubt when he said he wanted to retain national ownership of Spain's energy providers. Zapatero late Tuesday held lengthy talks with E.ON chairman Wulf Bernotat to discuss the takeover offer for his country's leading electricity group and insisted he wanted to see Spanish energy utilities remain in Spanish hands, according to Spanish government sources.
El Mundo newspaper's Web site said Zapatero had told Bernotat he was "worried" about the bid.
Responding to Zapatero's concerns about maintaining key sectors in Spanish hands, Gas Natural said it wanted to create a company "with the capacity to compete at European and world level and with the capacity to maintain its centre of decision-making in Spain."
Combined energy giant would service 50 million clients
E.ON's all-cash offer, which would create the world's leading power and gas supplier, risks upsetting Zapatero's plans to create a national champion in the Spanish energy sector which could compete internationally in a consolidated market.
The Germans have offered 27.50 euros ($32.75) per share compared with Gas Natural's 21.30 euros per share, but the latter insisted Tuesday that its own bid was in the interests of the electricity company's shareholders and Spain in general.
The combination of E.ON and Endesa would create a group with 50 million customers and 107,000 employees, putting it ahead of companies such as Electricite de France (EDF), Tokyo Electric, RWE, Enel and Suez, the German group said.
The E.ON takeover bid, announced Tuesday in Germany, had appeared to take Madrid by surprise and analysts saw the cash bid as a blow to Madrid's support for "strong energy enterprises" at global level.
A finance ministry spokesman earlier had told reporters it was "not very likely" the government would intervene, despite having a "golden share" in Endesa through June 2007 that would enable it to block E.ON. The spokesman said Madrid was "totally neutral" on the German offer.
The European Union has ruled such state holdings illegal, and the ministry spokesman pointed out that Madrid was debating the passage of legislation to bring Spanish law in to line to meet the EU stricture.
Any obstruction could anger EU over liberalization
If the Spanish government were to intervene and obstruct the bid it could spark a Europe-wide political row. Some analysts believe the EU would accuse Madrid of standing in the way of consolidation in Europe's energy markets.
The European Commission has been pushing for market liberalization reforms in the energy sector and has reportedly been getting increasingly impatient due to what it views as a widespread lack of progress in the implementation of reforms by member states.
Energy Commissioner Andris Piebalgs said last week that the EU executive will issue warnings against three member states over slow implementation by the end of March without naming names, although unconfirmed reports suggest E.ON and fellow German utility RWE AG as well as France's EDF, and Italy's Enel SpA have been accused of blocking competitors from operating on fair terms in their home markets.
In its reaction, Endesa's board said "the price offered by E.ON is clearly better than the rival Gas Natural bid but the board considers that it (the offer) does not adequately reflect the true value of Endesa," Endesa said.
Madrid wants strong Spanish enterprises
Spanish Secretary of State for Communication Fernando Moraleda said Madrid wanted to see the creation of "strong enterprises with Spanish capital on board and with a capacity to compete on international markets."
Asked about future government policy regarding Endesa, Moraleda added that Madrid respected the rules of the market.
Senior ruling Socialist Party official Alfredo Perez Rubalcaba said Madrid would apply "the same criteria" to the case as it had earlier with Gas Natural, saying that what counted was "the general interest, the interests of consumers and the strategic character of the sector."
However, the main conservative opposition Popular Party (PP), which said it had detected regional politicking in the original deal since the government has allies in the Catalan region that is home to Gas Natural, accused the government of being "the only ones responsible" for the German counter-bid.
There had been contradictory signs in Spain concerning the Gas Natural bid. The market regulator approved the deal but with conditions while the competition regulator was opposed.