-  Sunday 20 September 2020

    WRAPUP 1-France's Suez vows to block Italian counter-bid

    PARIS, Feb 28  - French energy company Suez (LYOE.PA: Quote, Profile, Research) vowed on Tuesday to fight any attempt by Italian rival Enel to derail its 70 billion euro plan to merge with state-controlled Gaz de France (GAZ.PA: Quote, Profile, Research) as Italy stepped up a political offensive over protectionism.

    The French company said it had not had any contact with Enel (ENEI.MI: Quote, Profile, Research) following the privatised Italian power firm's announcement last week that it was considering bidding for Suez.

    However, facing media for the first time since France rushed through the merger plans at the weekend, the two companies acknowledged that what Gaz de France chief Jean-Francois Cirelli called a "pseudo-threat" from Enel had forced them to accelerate alliance talks that had started months earlier.

    "If Enel attacks, we will defend ourselves," Suez Chief Executive Gerard Mestrallet told a news conference, asked whether he feared a counter-bid for Suez to frustrate plans for an all-French energy giant able to resist foreign predators.

    Italy has protested about what it regards as protectionist French state interference in the decision to merge Suez and Gaz de France, which came days after Enel had expressed interest in buying Suez in order to control its Belgian power activities.

    France says its own plans had been in the works for some time and denies it is protectionist.

    Europe's energy companies are in the midst of a takeover frenzy due to the cascading effect of high oil prices and the need to support major new investments.

    Mestrallet, a 56-year-old industry veteran and former civil servant, is set to run the combined group as its chief executive but will share some powers with Gaz de France boss Jean-Francois Cirelli, whose title has, however, not yet been announced.

    Mestrallet said the only contacts so far with Enel CEO Fulvio Conti had been pleasantries.

    "I don't know Mr. Conti. I don't have the pleasure to know the sound of his voice, even on the phone. The only contact I have had with him was when I sent him a crate of wine, Sauternes I think, for Christmas, for which he thanked me.

    "I told him that since he had just taken up his new role, I would like maybe to meet him."

    Conti, who has declined to say whether Enel would launch a hostile counter bid, met Italian government officials to consider the next steps. Enel's board will meet on Wednesday.

    Prime Minister Silvio Berlusconi meanwhile dispatched his economy minister to Brussels to ask for EU help in blocking the French merger plan, which Rome has called protectionist.

    Rome also threatened to widen the row by withdrawing its operating licences from French retail groups working in Italy unless Paris changed its stance on the affair.

    The centre-left opposition, which looks set to scrape a victory in April elections, chimed in as leader Romano Prodi threatened to review Electricite de France's (EDF.PA: Quote, Profile, Research) holding in Edison (EDN.MI: Quote, Profile, Research) or freeze its voting rights.

    "We too have a fridge and even a freezer," Prodi said in an interview with Bloomberg News quoted by Italian news agency Ansa.

    Rome allowed EDF to take over Italy's second-biggest power group last year after a four-year row over ownership rights.

    Economy Minister Giulio Tremonti in Brussels stepped back from the sabre-rattling, saying Italy was not out to retaliate or change its own takeover laws to make them more protectionist.

    "We are not here to retaliate but to analyse the situation and exchange ideas with the European Commission," he said.

    Tremonti told journalists Enel had planned a friendly bid for Suez with France's Veolia (VIE.PA: Quote, Profile, Research), but the latter changed its mind.

    "Suddenly, the French partner said it was never interested. It's bizarre that it was forced to write that on its Website. Go and look at Veolia's Website," he said.

    Veolia -- the company which inherited the water utility business of Suez's historic rival Generale des Eaux -- however stuck to its guns and denied it had taken part in any bid plan.

    Suez shares fell 3.3 percent to 30.89 euros, while Gaz de France added 0.2 percent to 29.03 euros.

    Mestrallet said he had already contacted European Union Competition Commissioner Neelie Kroes and would notify EU authorities to see whether divestments were needed to avoid having a dominant position in Belgium.

    Suez owns 98.62 percent of Electrabel (ELCBt.BR: Quote, Profile, Research), while Gaz de France has a 50-percent stake in Societe de Production Electrique, the country's only other producer of electricity apart from Electrabel.

    "SPE's position in the electricity business is what is probably going to be looked at very carefully by the competition authorities," Gaz de France Chief Operating Officer Jean-Marie Dauger told Reuters in an interview.

    Having reacted to the takeover threat at lightning speed over the weekend, when their boards approved the merger plans, Gaz de France and Suez set out a merger timetable lasting through 2006 to allow necessary legal changes.

    The French government faces growing domestic criticism for a U-turn on a previous pledge to maintain at least 70 percent of GDF in state hands.

    French Prime Minister Dominique de Villepin told parliament the deal would create an "international energy champion."

    Allowing time for parliament to debate dropping the law, Gaz de France will file its merger plans with the AMF regulator in mid-October and the two companies will hold extraordinary shareholder meetings in December.


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