Spanish Politicians Appear To Help Foster Superutility
Bid for Endesa by Iberdrola, Gas Natural Could Create Catalan Energy Powerhouse
Edited by Hugo Dixon
WSJ, September 6, 2005
It is finally happening. For years, Spanish utilities have been trying to merge, but politicians have always managed to put a spanner in the works. Now they seem to be helping things along.
Gas Natural has teamed up with electricity group Iberdrola to make a €23 billion hostile bid for rival energy supplier Endesa. Such a deal would create a Catalan-based superutility. And the local politicians appear to be driving events through La Caixa, a regional savings bank they control that has a 35% stake in Barcelona-based Gas Natural and an approximate 2% stake in Endesa. (See related article.)
It was only two years ago that Gas Natural was making a hostile bid for Iberdrola. They are teaming up now because they are both too small to take out Endesa on their own.
The strategic logic is pretty obvious for both groups. Gas Natural faces an increasingly competitive market and there are synergies to be had from selling electricity and gas to the same client. For Iberdrola, which has tried before to merge with Endesa, this is a golden chance to get its hands on those of its rival's assets that Gas Natural will make available.
Meanwhile, Endesa looks vulnerable. Its management is held in low regard. And it has bungled the transition to cleaner energy in the run-up to Kyoto and is still heavily dependent on coal. What's more, the power utility is creaking under nearly €20 billion in debt.
Against that backdrop, the opening shot of around €21.30 a share-a 20% premium to Endesa's average share price over the last six months -- will doubtless be taken seriously by Endesa shareholders. And they may not have many alternative routes to a premium. That's because it is unlikely the Spanish government would approve any other utility combination. After all, it depends on the Catalan Regional party's support to rule, and so it's unlikely to spoil the Catalans' party.
Edited by Hugo Dixon
WSJ, September 6, 2005
It is finally happening. For years, Spanish utilities have been trying to merge, but politicians have always managed to put a spanner in the works. Now they seem to be helping things along.
Gas Natural has teamed up with electricity group Iberdrola to make a €23 billion hostile bid for rival energy supplier Endesa. Such a deal would create a Catalan-based superutility. And the local politicians appear to be driving events through La Caixa, a regional savings bank they control that has a 35% stake in Barcelona-based Gas Natural and an approximate 2% stake in Endesa. (See related article.)
It was only two years ago that Gas Natural was making a hostile bid for Iberdrola. They are teaming up now because they are both too small to take out Endesa on their own.
The strategic logic is pretty obvious for both groups. Gas Natural faces an increasingly competitive market and there are synergies to be had from selling electricity and gas to the same client. For Iberdrola, which has tried before to merge with Endesa, this is a golden chance to get its hands on those of its rival's assets that Gas Natural will make available.
Meanwhile, Endesa looks vulnerable. Its management is held in low regard. And it has bungled the transition to cleaner energy in the run-up to Kyoto and is still heavily dependent on coal. What's more, the power utility is creaking under nearly €20 billion in debt.
Against that backdrop, the opening shot of around €21.30 a share-a 20% premium to Endesa's average share price over the last six months -- will doubtless be taken seriously by Endesa shareholders. And they may not have many alternative routes to a premium. That's because it is unlikely the Spanish government would approve any other utility combination. After all, it depends on the Catalan Regional party's support to rule, and so it's unlikely to spoil the Catalans' party.
posted by Marcel at 5:02 PM
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