Suez to propose share swap to save GDF deal

8th December 2006, Comments 0 comments

PARIS, Dec 8, 2006 (AFP) - French energy group Suez is considering proposing a share swap deal to GDF to keep faltering merger plans on track, newspaper reports said Friday.

PARIS, Dec 8, 2006 (AFP) - French energy group Suez is considering proposing a share swap deal to GDF to keep faltering merger plans on track, newspaper reports said Friday.

At a meeting of the Suez board on Friday, Suez chief executive Gerard Mestrallet would outline a share swap as an interim solution in order to keep the deal alive, the Financial Times and French business daily Les Echos reported.

Les Echos said GDF's bankers were mulling other options, in particular a public offer for Suez.

The plan for Suez to absorb state-controlled GDF was designed to create a French national champion able to compete in a consolidating European energy market and protect the companies from foreign predators.

But the controversial deal has become bogged down in regulatory and legal difficulties because of the privatisation of GDF. The French state's holding in the group will fall to about 34 percent from 80.2 percent after the deal.

The proposal by Mestrallet would leave the French government with an initial 20 pct stake in Suez — rising to 34 percent — and 51 percent of GDF.

In a parallel process the two companies would continue towards a full merger.

Under the share swap plan, the government would not have to privatise GDF and mechanisms would be built in to allow Suez to increase its stake to 49 percent in July, the FT said.

Some Suez shareholders oppose any deal however, and activist investment fund Knight Vinke Asset Management took out a page of advertising in the Friday edition of the Financial Times to outline its objections.

The US investment group outlined charged that cost saving estimates were too high, the state would retain "de facto control" of Suez, and that Suez shareholders were being underpaid.

Copyright AFP

Subject: French news

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