France set to unveil GDF-Suez energy merger

27th June 2007, Comments 0 comments

PARIS, June 27, 2007 (AFP) - The French government is set to unveil a mooted merger between state-owned gas company Gaz de France and private utility group Suez in the coming days, the daily Le Figaro said Wednesday.

PARIS, June 27, 2007 (AFP) - The French government is set to unveil a mooted merger between state-owned gas company Gaz de France and private utility group Suez in the coming days, the daily Le Figaro said Wednesday.

The government, which sees a tie-up with Suez as "the most pertinent" project for GDF, has asked both companies to present a merger proposal, the conservative newspaper added, without citing its sources.

Le Figaro's report came a few days before European energy markets were to be opened to greater competition, although GDF's position in France appeared to be well defended.

Shares in both groups gained in early Paris trading, while the CAC-40 index of leading shares was lower overall.

Suez might be obliged to spin off all or part of certain activities, such as its water and waste treatment units to balance out the groups' respective sizes and allow for a merger with rather than a takeover of the state-owned GDF, the report said.

But as Suez is reportedly reluctant to get rid of its Suez Environnement division, other divestments were also under consideration in an effort to "slim down" the private utility, Le Figaro added.

A GDF spokesman declined to comment on the report, saying only that a decision on a long-awaited move by the energy group would come "in due time."

GDF shares gained 2.21 percent to 36.48 euros in morning deals, while Suez was up by 1.04 percent at 41.73 euros. The CAC-40 index, meanwhile, had slipped by 0.47 percent.

The 5.0-euro difference in share prices worked against a suggested offer of one GDF share for each of those in Suez, even if an exceptional dividend of 1.0 euro per share was thrown in.

According to analysts at the Raymond James brokerage, Suez might offer investors a special dividend of 3.0 euros per share while selling off assets worth less than the environment division.

In late May, Prime Minister Francois Fillon had said the idea of a GDF-Suez merger was "valid" but noted that other options also existed, including a GDF alliance with the Algerian gas group Sonatrach.

Fillon had given himself until "late June, early July" to examine the various possibilities.

The long-discussed plan to merge GDF with Suez was designed to create a French national champion able to compete in a consolidating European energy market and protect both companies from foreign predators.

But the controversial deal ran into legal trouble that squeezed its calendar against campaigning for French presidential and legislative elections and caused key private investors to question whether it could happen after all.

The French Constitutional Council, which rules on the legality of government legislation, said in late November that a merger of GDF with another company could only become operational after July 1, when EU consumers are to be allowed to choose their own energy suppliers.

The Suez-GDF plan was initially seen as a pre-emptive defence against a possible hostile bid by Italian energy group Enel. Many analysts believe predators are following efforts to rescue the merger closely with a view to bidding for Suez if the deal with GDF falls through.


Copyright AFP

SUbject: French news

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