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Future of tie-up of Suez-GDF in question as EU merger deadline nears

Future of tie-up of Suez-GDF in question as EU merger deadline nears

Tension mounted Tuesday over the future of the merger plan for Belgian-French utility Suez and state-run Gaz de France as the deadline for the European Commission to sign off on it draws near.
Suez released a brief statement denying that it had issued an ultimatum to the French government over the deal, which has floundered amid political uncertainty and questions over the valuation of the two companies.
The denial came after the Financial Times had reported that Suez Chairman Gerard Mestrallet had written a letter, approved by the Suez board, to French President Nicolas Sarkozy stressing that if an agreement couldn't be reached before the end of the week, Suez would have to consider other options.
Suez said it has been in regular discussions since May with Sarkozy's and relevant French public authorities over the proposed merger.
Both companies report first-half results this week, and the commission's approval deadline expires before Friday.
Gaz de France CEO Jean-Francois Cirelli said the merger "isn't dead," and called on Suez to take "necessary steps" to ensure that it would go through, according to a news report. He did not elaborate on what those steps were, the report said.
"The authorization that the European Commission gave us is going to expire soon," he was quoted as saying by business daily Les Echos in an interview to be published Wednesday. An early copy was provided to The Associated Press. "We are going to ask for an extension."
Representatives for Gaz de France and Sarkozy's office could not be immediately reached Tuesday by Dow Jones Newswires.
France's new government has appeared undecided about the proposed tie-up between Suez and GdF, which was announced in February last year to fend off a hostile takeover attempt for Suez by Italian utility Enel SpA.
The situation has become more complicated as the difference between the two companies' share prices has widened.
According to the Financial Times, Mestrallet's letter proposed that direct and indirect government-owned shares in Suez be transferred to GdF before the merger to bridge the gap between the two companies' market valuations.
The move would be "good news," analysts at Cheuvreux wrote in a note to investors. "In such a scenario, the new entity would have treasury stock that could be canceled, enabling it to reduce the exceptional dividend requested by Suez shareholders."
In mid-February 2006, GdF shares were trading at euro27.35 while Suez's were at euro29.84, but the difference is now considerably greater. GdF shares closed Tuesday down 0.2 percent to euro33.90 (US$46.32), compared to Suez, whose shares fell 0.1 percent to euro38.29 (US$52.32).
The gap could worsen in the wake of both companies' first-half results, with analysts forecasting a drop in earnings before interest, taxes, depreciation and amortization, or EBITDA, at GdF _ but a rise at Suez.


Updated : 2021-05-11 19:57 GMT+08:00