Paul Singer from the Elliott fund has announced an alternative plan to the EDP takeover bid from China Three Gorges.
Elliott believes that EDP is undervalued by the market and that the takeover bid is not in the best interest of shareholders. He argues that the price offered by the Chinese state-owned company of €3.26 per share is “unacceptable” and that the Chinese are not committed to resolving regulatory concerns.
From the beginning of the offer, analysts pointed out that the deal would be unlikely to be approved by European and US regulators.
EDP’s shares reacted positively to the Elliott initiative and, for a while, topped the Chinese offer price launched in May 2018. EDP stock rose 2.9% to €3-274 and close for the weekend, up 2.45% at €3.26.
EDP’s chief executive, António Mexia, said, “We appreciate the contribution of Elliott and we will carefully analyze its proposals, in line with the practice followed with all our shareholders.”
On March 12th, EDP will present a strategic update to the market along with the release of the annual results.
Elliott, which has close to 3% of EDP’s capital, proposes the sale of assets, such as EDP Brazil, the Iberian thermal portfolio and 49% of the electricity distribution business in the Iberian Peninsula. The objective would be to invest €3.5 billion in renewable energies, reduce EDP’s indebtedness and use €1.2 billion for a share buyback programme to reward shareholders.
Elliott already has consulted the government, EDP’s board and the Chinese before releasing its detailed plan for the future of the company.
The fund, led by veteran deal-maker Paul Singer who has been referred to as the world’s most feared investor, also as ‘the Vulture of Argentina,’ has been increasing its position in EDP and plans to continue to do so.
In a statement, Elliott said that it, “wrote a letter to the General and Supervisory Board and to the executive board of EDP, which concludes that a strengthened EDP – which invests in its growth and optimises the portfolio – can achieve positive results and bring added value to all stakeholders.”
The Chinese State will win either way as China Three Gorges already owns 23% of EDP and another Chinese state entity, CNIC, owns 5%.