Tags: GDF | Suez | International | Power

GDF Suez Seizes International Power, Creates Giant

Tuesday, 10 Aug 2010 12:27 PM

France's GDF Suez is set to take control of Britain's International Power, the companies said on Tuesday, creating the world's largest utility with annual revenue of 84 billion euros ($111.5 billion).

The deal comes after talks were aborted earlier this year and will allow GDF access to growth in emerging markets and give it a foothold in the United Kingdom and Australia.

Britain's International Power can expect to cut financing costs as a result, anticipating its credit rating to be lifted to investment grade, from BB now.

"This is one of the few utility combinations that have always made sense, regardless of the economic environment," said a London-based analyst, who declined to be identified.

The deal is another example of a foreign player entering the British power market — where just two of the 'Big Six' household energy suppliers are controlled by domestic firms — and follows the 2008 sale of British Energy to EDF.

GDF Suez will transfer a number of assets in to International Power, in return for 70 percent of the ownership in the new enlarged group. Existing International Power shareholders will hold the remaining 30 percent.

International Power shareholders will also receive a special dividend of 92 pence per share, totaling 1.4 billion pounds — at the top end of analyst expectations — in exchange for relinquishing control of the company.

GDF declined to comment on the deal value. But based on its current share price, International Power, which will stay listed and based in London, will have a market value of 18.6 billion pounds after the deal.

The combined company will have generating capacity of over 66 gigawatts (GW) and revenue of 84 billion euros ($111.5 billion).

The GDF assets will be transferred into the British firm with net debt of 4.4 billion euros ($5.79 billion), the companies said, less than analysts had expected.

International Power's top management, including Chief Executive Philip Cox and Financial Director Mark Williamson, would retain their positions within the new company.

News of the tie-up came on the day both firms reported forecast-beating first-half results.

"Only GDF Suez' good results and the fact that the deal makes so much sense is disguising the fact that the transaction is lowering the value of the GDF Suez share somewhat," said one London-based analyst, who declined to be named.

It also comes as energy providers recover from the slump in demand caused by the global recession.

"In term of reduction of revenues, we have clearly bottomed out. We see some positive signs of market recovery, even if they still need to be confirmed," Jean-Francois Cirelli, vice-chairman and president of GDF Suez, said.

Leading International Power shareholder Neil Woodford, who holds an 11.2 percent stake through his Invesco Perpetual funds, said he backed the deal.

The companies said they had identified synergies of 165 million pounds per year, expected to be achieved by the sixth year following completion.

The deal is expected to complete at the end of 2010 or early 2011, subject to regulatory approval and consultation with employees, the companies said.

International Power is being advised by JP Morgan Cazenove, Morgan Stanley and Nomura, while GDF's advisers are Rothschild, Goldman Sachs, BNP Paribas, Ondra Partners and Blackstone.

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France's GDF Suez is set to take control of Britain's International Power, the companies said on Tuesday, creating the world's largest utility with annual revenue of 84 billion euros ($111.5 billion). The deal comes after talks were aborted earlier this year and will allow...
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2010-27-10
Tuesday, 10 Aug 2010 12:27 PM
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