Bloomberg News

EDF to Boost Stake in Edison to 80.7% for About $915 Million

December 28, 2011

(Updates with closing share prices in sixth paragraph.)

Dec. 27 (Bloomberg) -- Electricite de France SA, Europe’s biggest power generator, reached an agreement to raise its stake in Edison SpA to 80.7 percent for about 700 million euros ($915 million), ending a yearlong effort to take control of the Italian utility.

The French power producer will effectively exchange a 50 percent stake in Edipower, an Edison subsidiary, for Transalpina di Energia Srl’s 50 percent stake in Edison, Thomas Piquemal, EDF’s chief financial officer, said on a conference call today. The purchase will raise EDF’s stake in Edison to 80.7 percent at an “implied” share price of 84 euro cents, according to a statement from the Paris-based company.

EDF, which currently owns 50 percent of Edison, has been trying to take full control for more than a year to gain access to natural-gas resources and markets in southeastern Europe and the Mediterranean basin. The value of the acquisition is a 1 percent premium to Edison’s 83.15 euro cent closing price on Dec. 23.

“The deal doesn’t look negative for EDF,” Benoit de Broissia, an analyst at KBL Richelieu Gestion in Paris, said by phone today. “EDF wanted control of Edison without spending a lot of cash. It was a difficult situation.”

Standard & Poor’s cut Edison’s credit rating and Moody’s Investors Services placed it on review for a downgrade after the Italian utility reported a nine-month loss in October. The agreement will reduce Edison’s debt by 1.1 billion euros and “will reassure rating agencies,” Piquemal said.

‘Move Quickly’

Edison fell 1.7 percent to 81.7 euro cents at the close in Milan. EDF fell 1.5 cents to 18.4 euros. The preliminary accord requires approval from the companies’ boards before the end of next month, with final contracts signed by Feb. 15, EDF said.

“We want to move quickly,” Piquemal said. “We no longer want to be under pressure by ratings agencies.”

Edison is the latest Italian company to be taken over by the French. Groupe Lactalis won control of Parmalat SpA and LVMH Moet Hennessy Louis Vuitton SA bought Bulgari SpA earlier this year.

Criticism of these purchases led EDF Chief Executive Officer Henri Proglio to say in July he wouldn’t negotiate on taking control of Edison until Italian authorities give their approval.

“We reached an agreement and authorities said they didn’t want it because of cheese and jewelry,” Proglio said July 29 about a previous Edison deal that was scuttled. Another agreement reached in October looked uncertain earlier this month amid disagreements over debt and governance.

Piquemal declined to comment on the politics behind today’s deal.

Consob Decision

“I’m particularly satisfied with the success of the negotiations between EDF and A2A and its main Italian partners,” Corrado Passera, Italy’s Minister of Economic Development, said in an e-mailed statement. A2A becomes the country’s second biggest power company by taking control of Edipower, he said.

The transaction depends on EDF getting Italian market regulator Consob to agree that a mandatory public tender offer for Edison doesn’t exceed 84 euro cents a share, according to the statement.

“We are ready” to make a general offer “if the regulator confirms this price,” Piquemal said. “It’s up to the Consob to decide.”

Transalpina, known as TdE, is currently half owned by EDF and half by Delmi SpA, which in turn is owned by A2A and other Italian companies. EDF currently owns 20 percent of Edison directly and 30 percent through TdE.

‘Simplified’ Agreement

Delmi plans to acquire a 50 percent stake in Edipower from Edison and 20 percent from Alpiq for 600 million euros and 200 million euros respectively, according to the statement. Edipower will then be 70 percent owned by Delmi, 20 percent by A2A and 10 percent by Iren.

The agreement is “simplified” compared to one reached in October because Delmi shareholders will no longer have a stake in Edison, Piquemal said. EDF will get nearly 8 gigawatts of generation capacity in Edison while Edipower has about 7 gigawatts including 2 gigawatts on sites that will be be closed, he said.

Edison will sign a contract to supply a minimum of 50 percent of Edipower’s gas for six years, EDF said.

Edison has a market value of about 4.3 billion euros. In October, the company reported a 93 million euro loss because of gas contracts, writedowns and higher taxes. Net debt as of Sept. 30 was 4.1 billion euros, up from 3.7 billion euros at the end of 2010.

--With assistance from Jacqueline Simmons in Paris and Andrew Davis in Rome. Editors: Tina Davis, Torrey Clark

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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