Shares of RWE AG, Germany's second- largest utility, rose the most in four years on speculation Electricite de France SA plans to buy the company, which has a market value of 45.8 billion euros ($61.7 billion).
Electricite de France representatives have already met with the German government to discuss the proposed deal, German radio station SWR said. RWE has seen ``no signs'' of a bid from the French company, spokeswoman Julia Scharlemann said. A German government spokesman denied any contact with EDF.
RWE and other utilities have been the subject of takeover speculation as power providers seek acquisitions ahead of the full opening up of European markets to competition in July. RWE shares jumped in November on reports OAO Gazprom might consider buying part or all of the company.
``We see a whole range of hurdles for an EDF bid, but at the end of the day it could be possible,'' said Matthias Heck, an analyst at Sal Oppenheim in Frankfurt who raised his rating on RWE to ``buy'' from ``neutral'' today. ``Takeover speculation will certainly support RWE stock.''
Shares of RWE climbed as much as 6.8 percent, their biggest jump since April 2003, before paring part of their advance after European Union regulators said they're probing the company for allegedly blocking competitors' access to a natural gas network in Germany.
RWE stock was up 3.90 euros, or 5 percent, at 81.87 euros as of 11:45 a.m. in Frankfurt. EDF shares rose 0.6 percent to 65 euros in Paris after initially falling as much as 1.2 percent.
`No Contacts'
European utility deals have risen 45 percent this year to $124 billion, compared with $85.7 billion in the same period of 2006, according to data compiled by Bloomberg.
Italy's Enel SpA and Spanish construction company Acciona SA announced a joint bid for Endesa SA last month, valuing Spain's largest power company at 43.7 billion euros.
``There have been no contacts whatsoever between EDF and the German government,'' Chancellor Angela Merkel's spokesman Ulrich Wilhelm said in a statement. ``That's nonsense.''
``EDF denies any contact between EDF representatives and German authorities on RWE,'' EDF spokesman Francois Molho said by telephone from Paris. A spokeswoman for the French finance ministry declined to comment. EDF is state-controlled.
``The state government has had no talks about RWE,'' Holger Schlienkamp, deputy spokesman for the regional government of North Rhine-Westphalia where RWE is based, said today by telephone.
`Substantial Divestments'
EDF offered to sell its stake in Energie Baden-Wuerttemberg AG to avoid antitrust concerns, according to SWR. Dirk Ommeln, a spokesman for EnBW, declined to comment.
Babcock & Brown Ltd. might buy EDF's stake in EnBW to ease antitrust concerns, the radio station said. Phil Green, chief executive officer of Babcock & Brown Ltd., also declined to comment.
``I can't see anything happening without the political backing of both France and Germany,'' said Sven Scholze, a utility credit analyst at F&C Asset Management in London, which has 135 billion pounds ($267 billion) of assets under management.
`The EU would press for substantial disinvestments and there is always the danger of culture clashes since EDF is effectively still a state run company,'' he said.
RWE sold its Thames Water unit last year for 4.8 billion pounds to a group led by Macquarie Bank Ltd., as part of Chief Executive Officer Harry Roels' plan to focus on power sales.
Credit-Default Swaps
It said it plans to invest the proceeds of the sale in gas or power companies in eastern Europe as markets there open to competition.
Credit-default swaps based on 10 million euros of EDF debt were unchanged at 6,500 euros, according to Deutsche Bank AG. Credit-default swaps are based on corporate bonds and are used to speculate on a company's ability to repay debt. An increase indicates an worsening in credit quality. Default swaps on RWE rose 500 euros to 9,000 euros, according to Deutsche Bank.
RWE Probed by EU on Gas Network Access; Eni Reviewed
by Matthew Newman and Thom Rose
RWE AG is being probed by European Union regulators for allegedly blocking competitors' access to a natural gas network, harming competition and spurring higher prices for consumers. Eni SpA of Italy is also being reviewed.
The European Commission, the EU's antitrust authority in Brussels, said in a statement today that it's investigating RWE for erecting ``unjustified obstacles'' to rivals' access to the regional wholesale gas market in North Rhine-Westphalia, Germany. Eni was accused of ``capacity hoarding,'' the commission statement said.
The barriers concern ``prices charged for access to gas networks operated by RWE TSO, inflation of RWE TSO's costs, maintenance of an artificial network fragmentation and failure to release transportation capacity to allow customer switching,'' the notice said. The probe began on April 20.
Barbara Woydtke, a spokeswoman for Essen-based RWE, Germany's second-biggest utility, said the company had been notified by the EU about the probe. RWE follows ``clean rules'' in the gas transport business, she said. A Rome-based spokeswoman for Eni, who declined to be identified, wouldn't comment. Eni is Italy's largest oil company.
Shares of RWE climbed as much as 6.8 percent to 83.25 euros on speculation Electricite de France SA plans to buy the company. The stock pared some of its gain following the notification of the antitrust investigation.
December Raids
RWE and other German utilities including bigger competitor E.ON AG were raided by EU antitrust regulators on Dec. 12. Competition officials visited the companies as part of an investigation to collect evidence of possible market-sharing, price-fixing and unfair business practices. Under EU rules, companies can be fined as much as 10 percent of annual sales for breaking EU antitrust rules.
Competition Commissioner Neelie Kroes, speaking to reporters at a conference in St. Gallen, Switzerland, had no comment.
Eni, Italy's biggest oil company, is also being investigated for ``strategic underinvestment,'' the commission Web site said.
The commission said it's concerned about capacity hoarding and strategic underinvestment ``in the transmission system leading to the foreclosure of competitors and harm for competition and customers in one or more supply markets in Italy.''
