-  Wednesday 23 October 2019
     

    France says it felt it had to act on Suez

    THURSDAY, MARCH 16, 2006
     BRUSSELS France has told European regulators that the utility Suez and the state-owned Gaz de France felt compelled to accelerate merger talks, with the explicit encouragement of the French state, after learning that a foreign bidder intended to break up a company that France felt could become a European champion, according to people familiar with the French position and internal documents the European Commission received from Paris.
     
    The commission, which is responsible for policing the EU's single market, has set Friday as the deadline for the French government to respond to accusations that it orchestrated a shotgun merger between two French companies in order to block a bid for Suez by the Italian energy company Enel.
     
    France submitted several pieces of evidence to the commission, according to a person who has seen the documents.
     
    But European Union officials said the commission was not satisfied with the French response and was likely to ask the government to submit a more detailed chronology of events.
     
    "The French response is a bit thin," said one official, who requested anonymity because the case is still ongoing.
     
    In one of the documents - a March 8 letter from Finance Minister Thierry Breton of France to his Italian counterpart, Giulio Tremonti - Breton defended France's role in the deal, and said discussions between Suez and Gaz de France began in the autumn, well before the government became aware of Enel's plans to bid for Suez.
     
    The submission goes on to explain that the French government, as an 80 percent shareholder in Gaz de France, was aware of talks between GDF and Suez and, as a result, had a natural interest in the fate of one of France's largest utility companies.
     
    A person familiar with France's position, who requested anonymity because the EU is still looking into the matter, said the government became concerned when rumors emerged that Enel could break up Suez by selling off some noncore businesses. Such a breakup would have run afoul of government desires to ensure the creation of a European industrial champion, the person said.
     
    "It was important for France and the French government that Suez be part of a global industrial tie-up," the person said, "rather than be used as a foreign company as part of a financial game that could result in the disposal of industrial activities Suez had developed over more than 20 years."
     
    Enel has said it had mainly wanted to buy Suez in order to obtain Electrabel, a Belgium-based electricity unit of the French company.
     
    Also included in the documents France sent the commission was a separate letter written by France's permanent representative to the EU, Pierre Sellal, to Martin Power, the chief of staff of Charlie McCreevy, the EU's single market commissioner.
     
    In the letter, Sellal assured Power that France had not violated any aspect of the EU's treaties nor had it used its position to improperly influence a deal.
     
    France also included a letter from the French financial regulator, Michel Prada, stating that both Gaz de France and Suez had complied with French regulations when they submitted their merger documents to French financial authorities.
     
    People familiar with McCreevy's thinking said he remained deeply suspicious of the role the French government played in the Suez deal, since the merger was announced only after the disruption of negotiations between Enel and another French utility, Veolia Environment, over a joint purchase of Suez.
     
    "France knows how to work the system," McCreevy said in a recent interview. "But countries shouldn't come to Brussels and sign up to the internal market and then do the opposite. It is hypocritical."
     
    The inquiry heightens a showdown between France and the EU's executive, which is trying to assert itself in the face of a recent bout of Europe-wide economic nationalism.
     
    But the commission's powers to censure France remain limited, especially if it is determined that France broke the spirit of the single market, but not the letter of the law.
     
    Should commission officials determine that the French government played an active role in thwarting a cross-border takeover bid by an Italian company for a French one, the commission could file suit against France in the European Court of Justice in Luxembourg, a process that McCreevy has said could drag on for years.
     
    "What can we do? We can write a lot of letters. We use a lot of ink. But we can't rule by diktat, we are a community of law and we have to give due process to countries," he said during the interview.
     
    He added: "The problem is that the process takes a long time and at that point the situation could have changed at the time of the end game."
     
    The European Commission president, José Manuel Barroso, railed anew Wednesday against countries pursuing protectionist policies, saying the EU's executive arm would take robust action against companies that abused their dominant positions in national markets.
     
    "Defending national champions in the short term generally leads in the long term to relegating them to the second division," he told the European Parliament. "We don't need any national champions - what we need are world champions based in Europe."
     
    The Suez deal is just one of a string of tie-ups that has fanned fears of protectionism spreading across the bloc.
     
    The commission has also asked Spain, which has been trying to fend off German energy giant E.ON from buying Spanish group Endesa, to explain a recent decision to give Spanish regulators powers to block the merger. It wants Spain to say how it would guarantee that the new rules would not be used to discriminate against foreign companies.
     
    On Wednesday, Industry Minister José Montilla of Spain requested additional time because the new rules had yet to be debated by the Parliament.
     
    "The minister finds it illogical to respond to a letter about a decree that has not yet been ratified by Parliament," a ministry official said.
     
    Renwick McLean in Madrid contributed to this story.
     
     BRUSSELS France has told European regulators that the utility Suez and the state-owned Gaz de France felt compelled to accelerate merger talks, with the explicit encouragement of the French state, after learning that a foreign bidder intended to break up a company that France felt could become a European champion, according to people familiar with the French position and internal documents the European Commission received from Paris.
     
    The commission, which is responsible for policing the EU's single market, has set Friday as the deadline for the French government to respond to accusations that it orchestrated a shotgun merger between two French companies in order to block a bid for Suez by the Italian energy company Enel.
     
    France submitted several pieces of evidence to the commission, according to a person who has seen the documents.
     
    But European Union officials said the commission was not satisfied with the French response and was likely to ask the government to submit a more detailed chronology of events.
     
    "The French response is a bit thin," said one official, who requested anonymity because the case is still ongoing.
     
    In one of the documents - a March 8 letter from Finance Minister Thierry Breton of France to his Italian counterpart, Giulio Tremonti - Breton defended France's role in the deal, and said discussions between Suez and Gaz de France began in the autumn, well before the government became aware of Enel's plans to bid for Suez.
     
    The submission goes on to explain that the French government, as an 80 percent shareholder in Gaz de France, was aware of talks between GDF and Suez and, as a result, had a natural interest in the fate of one of France's largest utility companies.
     
    A person familiar with France's position, who requested anonymity because the EU is still looking into the matter, said the government became concerned when rumors emerged that Enel could break up Suez by selling off some noncore businesses. Such a breakup would have run afoul of government desires to ensure the creation of a European industrial champion, the person said.
     
    "It was important for France and the French government that Suez be part of a global industrial tie-up," the person said, "rather than be used as a foreign company as part of a financial game that could result in the disposal of industrial activities Suez had developed over more than 20 years."
     
    Enel has said it had mainly wanted to buy Suez in order to obtain Electrabel, a Belgium-based electricity unit of the French company.
     
    Also included in the documents France sent the commission was a separate letter written by France's permanent representative to the EU, Pierre Sellal, to Martin Power, the chief of staff of Charlie McCreevy, the EU's single market commissioner.
     
    In the letter, Sellal assured Power that France had not violated any aspect of the EU's treaties nor had it used its position to improperly influence a deal.
     
    France also included a letter from the French financial regulator, Michel Prada, stating that both Gaz de France and Suez had complied with French regulations when they submitted their merger documents to French financial authorities.
     
    People familiar with McCreevy's thinking said he remained deeply suspicious of the role the French government played in the Suez deal, since the merger was announced only after the disruption of negotiations between Enel and another French utility, Veolia Environment, over a joint purchase of Suez.
     
    "France knows how to work the system," McCreevy said in a recent interview. "But countries shouldn't come to Brussels and sign up to the internal market and then do the opposite. It is hypocritical."
     
    The inquiry heightens a showdown between France and the EU's executive, which is trying to assert itself in the face of a recent bout of Europe-wide economic nationalism.
     
    But the commission's powers to censure France remain limited, especially if it is determined that France broke the spirit of the single market, but not the letter of the law.
     
    Should commission officials determine that the French government played an active role in thwarting a cross-border takeover bid by an Italian company for a French one, the commission could file suit against France in the European Court of Justice in Luxembourg, a process that McCreevy has said could drag on for years.
     
    "What can we do? We can write a lot of letters. We use a lot of ink. But we can't rule by diktat, we are a community of law and we have to give due process to countries," he said during the interview.
     
    He added: "The problem is that the process takes a long time and at that point the situation could have changed at the time of the end game."
     
    The European Commission president, José Manuel Barroso, railed anew Wednesday against countries pursuing protectionist policies, saying the EU's executive arm would take robust action against companies that abused their dominant positions in national markets.
     
    "Defending national champions in the short term generally leads in the long term to relegating them to the second division," he told the European Parliament. "We don't need any national champions - what we need are world champions based in Europe."
     
    The Suez deal is just one of a string of tie-ups that has fanned fears of protectionism spreading across the bloc.
     
    The commission has also asked Spain, which has been trying to fend off German energy giant E.ON from buying Spanish group Endesa, to explain a recent decision to give Spanish regulators powers to block the merger. It wants Spain to say how it would guarantee that the new rules would not be used to discriminate against foreign companies.
     
    On Wednesday, Industry Minister José Montilla of Spain requested additional time because the new rules had yet to be debated by the Parliament.
     
    "The minister finds it illogical to respond to a letter about a decree that has not yet been ratified by Parliament," a ministry official said.
     
    Source
    iht
     




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