FRANCE/BELGIUM: Suez and Gaz de France agree on merger, creating the third largest electricity and gas company
- 00:00:05
- ITN Source
FRANCE/BELGIUM: Suez and Gaz de France agree on merger, creating the third largest electricity and gas company
Suez and Gaz de France agree on merger, creating the third largest electricity and gas company but gas prices should not go up for French customers. Gaz de France and Suez on Monday (September 3) cleared the way to create the world's third-largest electricity and gas company after their boards approved the revised terms of a politically charged merger. The merger, first drawn up 18 months ago but delayed by disputes over valuation and control, will be on the basis of 21 Gaz de France shares for 22 Suez shares and involves the spin-off of Suez's water and waste-management activities. Excluding the environment business, the new GDF Suez is valued at around 78 billion euros ($107 billion), making it the third-largest power utility after France's EDF and Germany's E.ON. The groups announced their agreement in a joint statement after a weekend of intense discussions to solve a financial impasse that threatened to torpedo the deal. Their boards met late on Sunday (September 2) to approve terms hammered out in government offices after French President Nicolas Sarkozy put pressure on Suez to abandon most of its historic water and waste-management assets and focus on electricity and gas. GDF's chairman, François Cirelli thanked French government for backing the merger. Under the new deal, Suez will divest 65 percent of its environment activities -- which analysts give an enterprise value of 18 to 20 billion euros -- through a stock market listing, which will take place at the same time as the merger. GDF's chairman Cirelli gave assurances that the merger would not result in an increase of gas prices for French clients. "Gas prices depend on oil prices, not on the legal structure of our company. Gas prices, after a sharp increase in recent years due to the rise of oil prices, are today stable. Those prices will be controlled by the state." he said at a news conference. GDF and Suez saw their shares fall 4 percent each to 35.20 euros and 40.12 euros respectively by 0940 GMT as investors locked in profits on the stocks, which rallied more than 8 percent last week, traders said. Richelieu finance's asset manager Julien Quistrepert said: "We think this sharp fall isn't due to the fundamentals but is more linked to an increase in profits because the Suez share has been good lately. Investors decided to make some profit on this today." He added it was a good time to invest in the share: "It's a good idea to make the most of this morning's market correction to increase one's share in the company which presents very good prospects." he said. The water spin-off was needed to slim down Suez to preserve a politically acceptable merger of equals with the smaller GDF, sources close to the talks have said. The 65 percent environment business stake will be distributed to Suez shareholders. Formation of GDF Suez will be completed as early as possible in 2008, the companies said. The merger implies the privatisation of Gaz de France, a move strongly opposed by unions and opposition Socialists, with the French state due to hold "more than 35 percent" in GDF Suez, compared with its current GDF stake of around 80 percent. Suez head Gerard Mestrallet will become chairman and chief executive of the new group, with GDF chief Jean-Francois Cirelli set to become the new group's vice-chairman. In Brussels, the European Union (EU) warned that the new company could face a fine if it did not notify changes in its agreed structure to the Commission. Jonathan Todd, spokesman for Competition Commissioner Neelie Kroes explained that after the merger is approved, the Commission will have to review the deal under the merger regulations. "If any concentration is implemented, a concentration falling within the scope of the Merger Regulation is implemented without having been notified or been approved by the Commission, then theoretically the fine can be up to 10 percent of the company's turnover," he said.
ITN Source | September 4, 2007
