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Gas Natural launches $17 bn bid
MADRID, March 10 (Reuters) - Spain's largest gas company Gas Natural launched an unsolicited 15.3 billion euro ($16.9 billion) bid for power group Iberdrola on Monday in one of the largest industrial takeover attempts in Spanish history. The shock move would create a combined giant worth 21 billion euros. The offer of 6.8 euros in cash plus 0.58 of a new Gas Natural share for each share in Iberdrola values Iberdrola's shares at 17.01 euros each, a premium of 19.6 percent over their closing price of 14.22 euros on Friday. Gas Natural is Spain's second-largest electricity utility with about 40 percent of the local market. The deal rivals in size a friendly bid for Iberdrola two years ago by larger utility Endesa, also worth around 15 billion euros. That fell apart when the government imposed antitrust conditions that Endesa found unacceptable. At the time of the Endesa-Iberdrola talks, Gas Natural was interested in making its own bid for Iberdrola but was rebuffed by the Iberdrola board. Iberdrola, which has been seen as a potential target since the Endesa deal collapsed, was quick to dismiss the new proposal as "very bad" and aimed at spoiling its chances of buying Basque gas company Naturcorp, which is being privatised. Gas Natural, whose controlling shareholders are oil giant Repsol YPF and unlisted savings bank La Caixa, has made clear its ambitions in the electricity market. Its offer is backed by a 6.6 billion euro loan. Last year, it brought two gas-powered combined cycle plants on line, allowing the company to triple its electricity sales to 2,571 GWh, giving it a four percent market share. At the same time Iberdrola has been making inroads into Spain's fast-growing natural gas market. Still, initial market reaction to the deal was cool. Traders said Gas Natural shares were due to plummet once trade resumes. Trade in both Gas Natural and Iberdrola was suspended earlier on Monday by the Spanish market regulator CNMV. "We're waiting to see the terms, but it doesn't seem to make a lot of sense to me," said one leading dealer in Spanish stocks. "I don't think there are sufficient synergies between the two groups to justify the deal." Analysts at Barclays Capital said a 20 percent premium would raise Iberdrola's enterprise value to 26 billion euros, versus less than 10 billion euros for Gas Natural at present. "This is just too big for Gas Natural to swallow in our view," said Andrew Moulder, a credit analyst at Barclays Capital, in a note to clients. "Gas Natural does want to get into the generation market and is building some combined cycle plants with Iberdrola. We would not discount some form of strategic alliance but don't see an outright takeover as something GN could achieve," he said. La Caixa, one of Spain's biggest financial institutions, holds 31.1 percent of Gas Natural and would be likely to play a part in financing the acquisition. La Caixa shares control of Gas Natural with Repsol, which owns 24 percent of the gas distributor. By market capitalisation, Gas Natural was worth 7.89 billion euros ($8.7 billion) and Iberdrola was worth 12.82 billion euros as of Friday's closing share price. Repsol and Gas Natural wanted to make a play for Iberdrola once before, while the Endesa-Iberdrola deal was in the works, but were rejected by Iberdrola. That whole process ended up costing Iberdrola Chief Executive Javier Herrero his job, and the company has been remade with a new identity under his replacement, Ignacio Sanchez Galan. While Spanish utility rivals Endesa and Union Fenosa are saddled with debt and heavy exposure to Latin America, Iberdrola gets 95 percent of its operating profit from the still growing Spanish domestic market. Iberdrola's Latin American exposure is limited to relatively stable Mexico and Brazil, the largest economy in the region. Within Spain it has bet heavily on wind power and has the highest percentage of hydroelectric capacity, bringing economic windfalls during periods of heavy rainfall. Iberdrola last year surpassed larger rival Endesa in its stock market value. Banking sources said Gas Natural was advised in its bid by Goldman Sachs, while Iberdrola was being advised by Morgan Stanley. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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