The French government was today scrambling to save its scheme to create a national champion power group by engineering an €80bn (£54bn) merger between Suez and Gaz de France. Amid evidence that the two groups had given up speaking to each other, the government, which brokered their engagement in February, was reported to be seeking alternative French partners to prevent Suez becoming a takeover target for a foreign group.
Ministers in the outgoing centre-right government of president Jacques Chirac had, according to market rumour in Paris, approached oil company Total to take over Suez, but their overtures were rebuffed.
Meanwhile the merger plans were further upset by reports that billionaire entrepreneur Francois Pinault had launched a €60bn rival break-up bid to acquire Suez and take control of its water and waste arm.
Mr Pinault, owner of luxury retail goods company PPR, was reported by French daily Le Figaro to have discussed with Dominique de Villepin, the French premier, plans to acquire Suez for €60bn, a 25% premium to the market capitalisation. He would then sell its energy assets to GDF for €40bn and retain its water and waste business. Mr Pinault refused to comment.
Mr de Villepin, who is said to be "unenthusiastic" about the plans, announced the Suez-GDF merger earlier this year to head off a proposed takeover approach for Suez from Italian group Enel. The Italians, who have since said they have lost interest, are known to have worked closely with both Veolia Environment, the French water business, and Mr Pinault, who abandoned earlier plans to buy Suez's water assets for €18bn in October.
Gérard Mestrallet, Suez chief executive, yesterday insisted the energy and water and waste assets of his group were complementary as he set out recent multi-billion contract wins for both wings, including in Britain. He also refused to comment on Mr Pinault's reported approach, which sent Suez shares, already up 47% this year, rising to fresh highs, valuing the group at €48bn.
But Colette Neuville, influential head of small shareholders' action group Adam, said a Pinault takeover would be "an ideal solution," enabling France to realise its dream goal of a combined energy group.
The all-French merger between Suez and GDF, which remains 80% in state hands, has hit the rocks since the country's constitutional court ruled it could not go ahead until July 1 next year - the date when the EU's energy market is due to be wholly competitive. But, by then, Mr Chirac will have been replaced in spring elections, probably by either centre-right leader Nicholas Sarkozy or socialist Ségolène Royal. Ms Royal has said she would scrap legislation to privatise GDF (leaving just 34% in state hands), while Mr Sarkozy is notably lukewarm.
Plans by both groups to win shareholder approval for their merger at extraordinary meetings this month have been dropped, while other suggestions to keep the alliance on track, including cross-shareholdings and joint ventures, have been rebuffed. Suez shareholders are also demanding a bigger payout under the deal as the value of their stock has soared in recent months.
On Wednesday, the GDF board, meeting for the first time since the court ruling, said the merger with Suez remained the group's best strategic option, a view echoed publicly by Suez. But requests from Jean-Francois Cirelli, GDF chief executive, for face-to-face talks with Mr Mestrallet to explore ways out of the impasse have met with no reply.
Sources close to Suez, which has been extolling its virtues as an independent company, said no move was likely, if at all, until the new year. The view at GDF, which this week secured gas supplies in a deal with Russia's Gazprom, is that it, too, can survive perfectly well on its own - but that Suez needs saving. Analysts increasingly view the merger as dead in the water.
Source: The Guardian
Ministers in the outgoing centre-right government of president Jacques Chirac had, according to market rumour in Paris, approached oil company Total to take over Suez, but their overtures were rebuffed.
Meanwhile the merger plans were further upset by reports that billionaire entrepreneur Francois Pinault had launched a €60bn rival break-up bid to acquire Suez and take control of its water and waste arm.
Mr Pinault, owner of luxury retail goods company PPR, was reported by French daily Le Figaro to have discussed with Dominique de Villepin, the French premier, plans to acquire Suez for €60bn, a 25% premium to the market capitalisation. He would then sell its energy assets to GDF for €40bn and retain its water and waste business. Mr Pinault refused to comment.
Mr de Villepin, who is said to be "unenthusiastic" about the plans, announced the Suez-GDF merger earlier this year to head off a proposed takeover approach for Suez from Italian group Enel. The Italians, who have since said they have lost interest, are known to have worked closely with both Veolia Environment, the French water business, and Mr Pinault, who abandoned earlier plans to buy Suez's water assets for €18bn in October.
Gérard Mestrallet, Suez chief executive, yesterday insisted the energy and water and waste assets of his group were complementary as he set out recent multi-billion contract wins for both wings, including in Britain. He also refused to comment on Mr Pinault's reported approach, which sent Suez shares, already up 47% this year, rising to fresh highs, valuing the group at €48bn.
But Colette Neuville, influential head of small shareholders' action group Adam, said a Pinault takeover would be "an ideal solution," enabling France to realise its dream goal of a combined energy group.
The all-French merger between Suez and GDF, which remains 80% in state hands, has hit the rocks since the country's constitutional court ruled it could not go ahead until July 1 next year - the date when the EU's energy market is due to be wholly competitive. But, by then, Mr Chirac will have been replaced in spring elections, probably by either centre-right leader Nicholas Sarkozy or socialist Ségolène Royal. Ms Royal has said she would scrap legislation to privatise GDF (leaving just 34% in state hands), while Mr Sarkozy is notably lukewarm.
Plans by both groups to win shareholder approval for their merger at extraordinary meetings this month have been dropped, while other suggestions to keep the alliance on track, including cross-shareholdings and joint ventures, have been rebuffed. Suez shareholders are also demanding a bigger payout under the deal as the value of their stock has soared in recent months.
On Wednesday, the GDF board, meeting for the first time since the court ruling, said the merger with Suez remained the group's best strategic option, a view echoed publicly by Suez. But requests from Jean-Francois Cirelli, GDF chief executive, for face-to-face talks with Mr Mestrallet to explore ways out of the impasse have met with no reply.
Sources close to Suez, which has been extolling its virtues as an independent company, said no move was likely, if at all, until the new year. The view at GDF, which this week secured gas supplies in a deal with Russia's Gazprom, is that it, too, can survive perfectly well on its own - but that Suez needs saving. Analysts increasingly view the merger as dead in the water.
Source: The Guardian
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