Suez-GDF combine to form global energy giant
The giant utility will be launched officially on 22 July despite domestic political opposition and misgiving by EU officials.17 July 2008
PARIS - A global energy giant emerged Wednesday after shareholders in French groups GDF and Suez approved a tie-up despite domestic political opposition and misgivings by EU officials.
Shareholders in both companies, in separate general assemblies, endorsed the merger, with the official launch of the giant utility set for 22 July, capping a tortuous procedure that began in February 2006.
In the marriage of Gaz de France, a public enterprise, and privately held Suez, which has energy, water and waste treatment operations, the French government hopes to establish a national energy champion, capable of winning business in the European and international arena.
Suez chairman Gerard Mestrallet described the deal to create GDF Suez as "one of the largest mergers in France in the last 20 years," with the new group to have a stock market value of EUR 93 billion and employ nearly 200,000 people.
Mestrallet will head GDF Suez, with current GDF chairman Jean-Francois Cirelli to be his second-in-command.
Speaking later to the GDF general assembly, Cirelli cited a need for "strong energy companies" such as GDF Suez.
"European energy security is a matter of primary importance," he said.
"There must therefore be strong energy companies ... We will have even greater need for energy, even if we do have to conserve."
The deal amounts to the privatisation of GDF and it triggered strong objections from the French left and consternation on the part of unions. It also means that the state enters Suez as the biggest shareholder.
The opposition Socialist Party in a statement Tuesday described the merger as "bad news for the public energy sector."
"Given the global energy crisis, the trend everywhere is for public authorities to take control of energy distribution but France has decided to privatise a national treasure.
"It is the consumers who will surely pay the price, as experience has shown in foreign privatisations."
The European Union, fearing the tie-up could hinder competition in the EU, likewise had reservations, preferring cross-border collaboration driven by market - rather than nationalist - forces.
The commission has objected to a number of moves in the energy sector in Europe in the last two years, complaining that they were motivated by national interests rather than by single-market principles.
However, the EU's executive commission, following an investigation, approved the GDF-Suez merger in November 2006.
But it insisted on the sale of Suez's Belgian gas subsidiary Distrigaz and Belgian electricity company SPE, in which Gaz de France had a 25-percent stake, as a condition for its endorsement.
As part of arrangements to balance the weight of the two groups, Suez is also to spin off its environment activities.
Suez shareholders will hold 55 percent of the new entity while those from GDF will have 45 percent.
The French state, which currently has an 80.2 percent interest in GDF, will be the biggest single shareholder, with 35.6 percent of the capital, followed by Belgian investment company Groupe Brussels Lambert, with 5.3 percent.
In 2007, GDF and Suez made combined net profit of EUR 5.6 billion, reported sales of EUR 74.3 billion and had debt of EUR 15.8 billion.
Earnings before interest, tax, depreciation and amortisation came to EUR 13.1 billion, with the company expecting that to rise to about EUR 17 billion by 2010.
[AFP / Expatica]