GDF, Suez press ahead with contested merger

16th March 2006, Comments 0 comments

PARIS, March 16, 2006 (AFP) - The chief executive of French utilities group Suez rejected on Thursday a possible hostile takeover bid for his company by Enel of Italy, and argued that he had long sought a "marriage" with state-controlled Gaz de France.

PARIS, March 16, 2006 (AFP) - The chief executive of French utilities group Suez rejected on Thursday a possible hostile takeover bid for his company by Enel of Italy, and argued that he had long sought a "marriage" with state-controlled Gaz de France.

The Italian energy company Enel is believed to be considering a hostile takeover bid for the French group Suez, but officials in Paris have tried to parry such a move with the GDF merger.

Suez president Gérard Mestrallet told the French business newspaper La Tribune that "the marriage with Gaz de France would be the crowning achievement of Suez".

Mestrallet, who was voted the year's best economic strategist by La Tribune readers, said the tie-up with GDF had been in the works since 2004 but that "at the time it was impossible since it was still a state institution".

He said that "the government held the key" to unlocking the deal since it had to reform its laws to allow greater private ownership of GDF.

The head of GDF, Jean-François Cirelli, and Suez president Mestrallet are to meet European Competition Commissioner Neelie Kroes to press their case Monday in Brussels for the proposed tie-up.

Paris has argued that the GDF-Suez merger announced last month was in fact in the works long before Enel began voicing its interest in Suez.

GDF, which is currently 80.4-percent owned by the French government, was partly privatized last July. The merger with Suez would see the state wind up with nearly 40 percent overall, according to French Finance Minister Thierry Breton.

The plan for Suez to be absorbed by GDF, which is a smaller business, is widely seen as a protectionist measure, and has been criticized by European Union and Italian leaders.

Examination of the merger proposal by GDF and Suez will test the European Commission's credibility and it should be prepared to go before the European Court of Justice if necessary, Trade Commissioner Peter Mandelson said Thursday in the Italian daily Corriere della Sera.

"The commission must analyse the project and verify there are no inappropriate interventions by the (French) government," Mandelson was quoted by the Italian-language newspaper as saying.

"We must use all the tools at our disposal to do that, it is not only an obligation but also a test of credibility for the commission. If necessary, we should be ready to take the matter to the Court of Justice. That's our job. If we do not, it will be a failure and we will be judged in consequence."

Some analysts think that Enel might yet make a hostile bid despite the Suez-GDF plan.

A source in Milan, Italy, close to manoeuvres by Enel told AFP on Thursday that Enel, before launching any bid for Suez, wanted assurances that EU competition authorities could obtain guarantees that France would not block an offer.

Mestrallet said a takeover by Enel, which has made it clear it wants to acquire Suez, would lead to the dismantling of Suez group since the Italian company was mainly interested in the Belgian electricity provider Electrabel over which Suez gained full control last year.

Enel "is only interested in Electrabel — that is, 20,000 employees out of the 160,000 in the whole group", Mestrallet said. "This is a bid at breaking up the company. What would happen to the 140,000 employees in other sectors that are sold off?"

Mestrallet said there was growing "worry — and even anger" among Suez employees, as well as among governments which were customers of the vast water distribution and utilities services operated by Suez.

He also argued that a bid by Enel would reduce the overall value of his group, since "spending billions in order to acquire a rival, especially through a hostile bid, which requires offering serious extra money, seems to destroy economic and social value".

A merger of GDF and Suez requires the approval of EU anti-trust regulators and the EU Comission has given the French government until March 17 to explain how its plans for the merger of Suez and state-controlled gas utility Gaz de France evolved.

Copyright AFP

Subject: French news

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