MADRID, 7 September 2005 — The board of Spain’s Endesa yesterday rejected as “insufficient” a 22.5-billion-euro ($28.4-billion) takeover bid by compatriot Grupo Gas Natural, the latest gambit in a slew of moves to consolidate the energy sector in Europe.
The board said the bid was “manifestly insufficient” and furthermore “introduces elements of uncertainty that prevent knowing the true worth” of Endesa, while also carrying risks for investors. Gas Natural reacted by telling AFP that it did not intend to modify its bid.
The Endesa reaction came as the Fitch international rating agency placed Gas Natural’s and Endesa’s Senior Unsecured A-plus and Short-term F1 ratings on Rating Watch Negative (RWN) in the wake of the bid. The Socialist Spanish government, sold on the idea of a sector national champion, said it would accept the regulators’ eventual green light. But some analysts voiced doubts on a move that would create a giant employing 34,000 people with sales worth some 25 billion euros.
If the bid were accepted - Gas Natural estimated that if the regulatory authorities are happy with the proposed deal it would go through by March - the merged entity would be the third-biggest investor-owned utility group in the world as measured by customers.
The proposed deal, which would give the Spanish group 30 million customers in total - 16 million in Spain and the majority of the remainder in Latin America - would leave it trailing only Germany’s E.ON and Enel of Italy and highlight Spain’s increasing economic muscle.
That muscle has been shown in recent years in telecoms and also in banking, Banco Santander having last year acquired Britain’s Abbey National for 12.70 billion euros ($15.59 billion) in Europe’s largest retail banking takeover. Monday’s announcement came amid increasing consolidation in the sector as E.ON casts its eye over a mooted 10-billion-pound (16-billion-euro, $18.5-billion) bid for British number five operator Scottish Power.
Suez of France is also after Belgium’s Electrabel as the sector re-aligns itself before the European market is fully liberalized in 2007. A March 2003 attempt by Gas Natural to acquire Iberdrola foundered as the previous conservative government did not want to create a dominant domestic player - mainly on competition grounds but also on fears the cash element was too small.
Gas Natural shares ended down 2.22 percent yesterday to close at 24.24 euros while Endesa shares in contrast raced ahead 7.65 percent to end at 20.65 euros, just shy of the 21.3 euros per share bid level, helping the Ibex-35index to rise 1.19 percent.
Several analysts were quick to voice doubts about the wisdom of the mooted deal, meanwhile. “It’s not an impressive premium for Endesa shareholders,” said one dealer with a leading European bank, as the price premium prior to yesterday’s session all but disappeared.