German energy group E.On has made a €55 bn cash bid for Endesa, Spain’s largest electricity company. E.On is offering to acquire 100 % of the share capital at a price of € 27.50 per share. Acquiring 50.01 % of the shares, its initial aim, would cost E.On €29 bn. The combination would create the world’s largest power and gas company, producing 421 TWh of power across the globe for 54 million customers in more than 30 countries.
The bid tops a hostile offer, that has been on the table since September, by Spain’s Gas Natural SDG SA, which values Endesa at about €21.20 per share for a € 22 billion offer. Although Endesa directors said the offer valued the company too low, the Gas Natural bid received conditional government backing, mainly, it is believed, because it would create a national champion in the power sector.
However E.ON may be on a collision course with the EU. Its bid comes a week after the European Commission threatened to crack down on the Union’s dominant energy companies for shutting out competition, and flagged up the probability of intense and detailed examination of future deals in the energy sector.
Neelie Kroes, the Competition commissioner, warned that “persistent concentration is a core problem in the markets”, adding “There can be no alternative to meticulous scrutiny of future merger operations.”
E.ON’s bid follows a prediction by Wulf Bernotat, its chief executive, that E.ON, Enel (of Italy) and EdF (France) would form a leading group of pan-European energy companies. Herr Bernotat has also predicted that prices would continue to rise as the number of suppliers shrinks.
