French utility group Suez has launched a €11.2 billion bid for the remaining stake in Belgion power group Electrabel.which it does not own.
Suez chief executive Gerard Mestrallet said the cash-and-share offer for minority shares in Electrabel would create value for both companies’ shareholders. “A group that is entirely harmonised can move further and faster in implementing synergies,” he added. However, this appears to contradict recent comments in which he suggested he remained comfortable with the structure of the Electrabel holding.
In bowing to investor pressure to resolve its relationship with Electrabel and buy in the remaining 49% of Electrabel, Mestrallet has been keen to play down any hint that the offer will see the company become more ‘French’ and the group has pledged to increase the Belgian presence on its board and expand operations in Belgium. Nonetheless, plans to extract synergies of some €350 million a year are all but certain to include cutting staff.
Politically the move is also potentially contentious given an on-going judicial investigation into allegations that Suez had tried to spy on Electrabel by hacking into computers, evidence of a long-running management conflict between Electrabel and its majority shareholder. Certainly concerns have been raised that the French offer will not succeed in delivering all of the remaining stock, 5% of which is held by local authorities, which are understood to be reluctant to support such a bid, and a further 20% or so is held by private investors. Suez said the deal which has been placed before the Electrabel board would be earnings-enhancing from 2007. The board has yet to respond.
