Gaz de France and Suez merger: A classic example of pre-emptive action |
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Tue, 28 Feb 2006 02:05
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PARIS - The French government appears to be on a "Save the National assets from outsiders" campaign as it mediated a merger of Suez SA and the state-owned Gaz de France in order to pre-empt Italy's Enel, which was considering tabling an offer for Suez. This is the second time in less than two months that the French government has intervened in a business deal after it opposed the hostile bid of steel baron Lakshmi Mittal's LNM Company for Arcelor.
The merger of Suez and Gaz de France, which has been given an initial approval by both boards, will create the world's second largest energy utility. The deal, which is a one-for-one stock swap, was termed as a "merger of equals" by both companies. French Prime Minister Dominique de Villepin had announced the deal on Saturday and the boards gave their nod on Sunday, "Given the strategic importance of energy, the fusion of Gaz de France and Suez seems today to be the most appropriate path," Villepin said.
“It will give France a second big player in the energy sector besides EDF and boost the global industrial vocation of our country." Finance Minister Thierry Breton said that the details are yet to be trashed out, but the government stake in Gaz de France would automatically come down, "The government's stake will automatically fall below 34 to 35 percent. But the state also has indirect shareholdings and overall the state shareholding will be slightly below 40 percent," he said.
The state currently holds 80 percent of the energy utility. This move is the latest in what is being dubbed as "economic patriotism" in France. However, Italy and Enel were not pleased with this high-handedness displayed by the French government. Enel's chief executive Fulvio Conti said that the move was akin to renationalizing Suez, "It's as if the Italian government took over Fiat to defend it from a takeover bid by Renault. It's the funeral of the European market," he said, adding that it was a big blow for the European market.
Italy's economy minister, Giulio Tremonti went a step further and labeled this move as a declaration of war, "We still have time to stop this race by the European states to build protective barriers," he said.
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