Enel and construction company Acciona agreed yesterday to sell 10 billion euros of assets in Europe now held by Endesa, Spain's biggest electricity company, to E.ON AG of Germany. E.ON in return will withdraw its 40 euro-per-share bid for Endesa. Enel will offer at least 41 euros a share for the 54 percent of Endesa it doesn't control, the Rome-based company said yesterday.
E.ON's withdrawal marks a victory for Enel Chief Executive Officer Fulvio Conti, who has pledged to acquire assets in Europe and the Americas. The Enel bid follows Conti's failed attempt last year to buy Suez SA, which was blocked when the French government said it plans to merge Suez with Gaz de France SA.
``As an Enel shareholder I feel a sense of relief,'' said Patrizio Pazzaglia, who helps oversee $400 million at Bank Insinger de Beaufort NV in Rome. ``There was the risk of waiting for months and months for the situation to be resolved, and now the cloud of uncertainly is lifted.''
Enel and Acciona could complete their bid by the end of July, Conti said on a conference call today. The two will file their proposal to Spain's stock market regulator for approval later this month, he said. They no longer need to comply with a six-month ban on presenting an offer after E.ON pulled out.
International Growth
E.ON stock jumped the most in four years, gaining 6 percent to close at 108.20 euros in Frankfurt. Shares of Enel rose 1.4 percent in Milan to 8.22 euros. Acciona gained 6 percent to 172.6 euros and Endesa shares slipped 1.1 percent to 40 euros in Madrid.
``For E.ON this is a way to salvage a very complex situation and focus on new goals,'' said Pedro Real de Asua who helps manage the equivalent of $8.4 billion for Barclays Fondos in Madrid, including Endesa, Enel, Acciona and E.ON stock. ``It's hard to see any more bidders joining this process. We are close to the end, though with this story you never know.''
He said E.ON may increase its payments to shareholders ``to regain investor confidence.''
E.ON, which will boost generation capacity as a result of the agreement, aims to be one of the three largest utilities in Spain, Chief Executive Officer Wulf Bernotat said at a press conference in Madrid today.
Enel's Tactics
Enel and its partner will gain Endesa's 22 million customers and hundreds of power plants from Poland to Chile. Enel needs to expand abroad to grow because the Italian government has capped the former monopoly's share of the domestic generation market at 50 percent.
``This is Enel's largest cross-border transaction and goes some way to reducing the gap between them and companies like Electricite de France SA,'' Luca Sega, who helps manage the equivalent of about $940 million at Aperta Sgr in Milan, said in an interview today.
Electricite de France, Europe's biggest utility by market value, competes with Enel in Italy where the French company jointly runs Edison SpA, the country's No. 2 power producer.
Enel will boost earnings per share growth ``in excess of 20 percent'' after it acquires Endesa, Conti said.
The Endesa assets being sold account for less than 1.3 billion euros in annual gross profit for the company, he said. A combination of Enel and Endesa will lead to ``significant'' savings in terms of purchasing fuel, equipment, and planning engineering projects.
International Expansion
Enel has earmarked about 13 billion euros for international expansion through 2011. That includes investment in Spain, France, Eastern Europe and Latin America. The company has set aside 27 billion euros for all capital spending and acquisitions through 2011, excluding Endesa.
Enel outmaneuvered E.ON by gaining control of a 25 percent stake in Endesa during the past two months, then teaming up with Acciona, the largest Spanish shareholder, with 21 percent. That alliance all but blocked E.ON from getting more than 50 percent of Endesa because the Spanish government, with a 3 percent stake, had opposed the bid.
``You don't have to be a genius to see that we can no longer obtain the majority shareholding we strive for,'' Bernotat said. ``We didn't want to enter into any price wars, that would have been very negative for our shareholders.''
E.ON had received about 1 percent through a tender as of March 7. The E.ON offer, which the German company had raised three times, was due to end today. E.ON first made its bid to counter a hostile offer by Spain's Gas Natural SDG SA in September 2005 and later gained support from the Endesa board.
The companies also agreed to drop all legal action against one another. E.ON had filed complaints in Madrid and New York arguing Enel's and Acciona's actions interfered with its own offer.
Enel said it aimed to keep Endesa shares listed on the Madrid exchange and to keep about 20 percent of the company trading.
