Gas Natural declines to raise bid for Endesa


By Chris Wright
AFP
MADRID
Petroleumworld.com 02 29 06

Spanish gas group Gas Natural declined to raise its takeover bid for fellow Spanish energy company Endesa on Tuesday, confounding analysts who had forecast an improved offer.

The board of Gas Natural met on Tuesday evening amid expectations that the group, bolstered by government measures to protect the country's energy sector, would propose a higher offer than its original 22.549-billion-euro (28.4-billion-dollar) hostile cash and shares bid.

This bid has been trumped by E.ON of Germany, which made a surprise offer for Endesa worth 29.0 percent more at 29.1 billion euros in cash.

Gas Natural issued a statement saying its original offer would remain in place but that another board meeting would be organised to discuss the takeover battle.

"The board made a detailed valuation of the known conditions of the offer presented by E.ON," the company said.

"The board adopted an agreement to reiterate to the market its intention to follow through with the bid and very shortly convene another board session which will take the opportune decisions in relation to the bid," the statement concluded.

The stock market authorities in Spain had Monday authorised Gas Natural to go ahead with its original takeover bid, setting the scene for a revised offer.
One market analyst, who asked not to be identified, told AFP that Gas Natural could raise its bid, but could go no further than 30 euros per share.

"They are likely to come out with a renewed bid matching E.ON but going any higher than 30 euros per share would likely be beyond them," the analyst said.

Stock market regulator CNMV chairman Manuel Conthe said earlier that other bidders could not join Gas Natural's current offer -- but the decision to postpone a raised bid was expected to leave open the door to other prospective bidders, which could include construction and services group FCC.

The financial newspaper Expansion had earlier reported that Gas Natural would put another 10.0 billion euros on the table, one third in cash and two thirds in stock, to make a bid totalling about 30.0 euros per share, up from an initial bid of 21.3 euros made last September.

Amid controversy over government moves seemingly designed to keep the Germans out, Spanish Finance Minister Pedro Solbes, pointing out goverment protection currently enjoyed by E.ON in Germany, told el Economista financial daily that the same rules should apply to all.

But he added that it could not be the case that "Spanish firms go abroad and then impede firms from other countries coming to Spain".

Spain's Socialist government conditionally backed the bid by Gas Natural, whose main shareholder is powerful Catalan savings bank La Caixa, to aid the creation of a Spanish national champion and last week Prime Minister Jose Luis Rodriguez Zapatero said key utilities should remain in Spanish hands.

Gas Natural's market capitalisation is nearly one sixth that of E.ON at 11.6 billion to 65.5 billion euros.

Last Friday, following a cabinet meeting, Deputy Prime Minister Maria Teresa Fernandez de la Vega said that Madrid had approved proposed energy sector reforms with the aim of protecting "strategic public interests".

The reforms, which took effect Tuesday, include a decree to limit recent sharp prices in wholesale electricity. Spanish operators currently benefit from a 'pooled' pricing system whose dismantling would hit operators' profits, making a raid by a foreign company at least theoretically less attractive.

The European Commission has already warned Spain not to throw up protectionist walls around its utility sectors, noting the previous conservative Spanish government introduced a law still in effect limiting foreign companies in which public authorities have a stake to holding more than 3.0 percent in voting rights in a Spanish energy company.

The German state of Bavaria has a holding of about 2.5 percent in E.ON but analysts say the Bavarian authorities are willing to dispose of this interest.

AFP 02 28 06

Copyright © 2006 AFP. All rights reserved

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