Villepin defends Suez-Gaz de France merger

PARIS, March 1, 2006 (AFP) – French Prime Minister Dominique de Villepin insisted Wednesday that the acquisition of French power and services group Suez by Gaz de France made good business sense and dismissed objections that it amounted to protectionism.

However, the price of shares in Suez jumped by 2.72 percent Wednesday to 31.73 euros on speculation that Italian energy giant Enel might still launch a counter-offer for the company despite its merger with GDF.

Shares in state-controlled GDF were up 1.76 percent in mid-day trade.

On Saturday France announced the planned Suez-GDF tie-up in a controversial move widely seen as aimed at thwarting a possible bid by Enel to swallow up Suez.

The deal sparked outrage in Italy, which has sought European Union intervention, and was criticized by the EU transport commissioner, Jacques Barrot, as economic protectionism that — while not illegal — violated the spirit of a European objective to create continent-wide energy groups.

Addressing a press conference here Villepin said: “There is no question of economic protectionism.

“The merger is an authentic industrial project between two enterprises, a French-Belgian project that is part of all of Europe’s energy independence.”

Suez gained full control of Belgian group Electrabel last year and renamed it Electrafrance.

“Economic protectionism does not mean curling up into oneself,” Villepin said. “What we want is to provide our companies with the means to fight with equal arms.”

He described the merger as a “coherent industrial project” that will give France one of the world’s leading energy and environment groups.”

“It will the number one European gas purchaser and the world’s leading liquefied natural gas operator.

“The state will maintain strong control of strategic decisions in the new group. It will guarantee public service operations and the security of our energy supply.”

Brokers Fideuram Wargny said that as Suez shareholders would seem to be harmed by the alliance with GDF, “this leaves room for a counter-offer.”

“But this possibility seems to us to be rather weak at the moment. The industrial plan (in a proposed counter-offer) would have to be at least as attractive as Suez-GDF and the price paid would have to be rather high, which would leave few potential bidders.

“And finally the French political commitment is very strong and remains rather dissuasive.”

Suez chief executive Gerard Mestrallet meanwhile said any move by Enel after the merger would have to target “two companies and not one, Suez and GDF, and it would also have to attack a project that everyone recognizes has an industrial logic to it”.

The head of the French insurance group AXA, Henri de Castries told the Financial Times in an article on Wednesday that France risked becoming the “cantankerous neighbour” of Europe and of being hit by a protectionist backlash.

Subject: French news