Spanish Gas Natural targets EUR 35 billion EDP merger
Reuters reported that Spanish power and gas company Gas Natural has approached Portuguese rival EDP about merging to form Europe's fourth biggest utility by market value, people familiar with the matter said. Talks over a potential EUR 35 billion deal and its potential structure are still at an early stage and there is no certainty over their outcome, four sources said, although Gas Natural chairman Isidre Faine has already sounded out his Portuguese counterpart Antonio Mexia about a tie-up.
However, a deal would create an Iberian champion competing with France's Engie and EDF and not far behind heavyweights Enel and Iberdrola. And it could trigger a long expected wave of consolidation among Europe's biggest utilities as they seek to gain scale and shift their revenue streams towards renewables to protect profits from steep competition and narrower margins.
A Gas Natural-EDP merger is seen as a good strategic fit as EDP has made big headway in renewable power while Gas Natural remains strong in gas-fired or coal generated electricity. The two have a complementary footprint, especially in Latin America where the Spanish firm is strong in Chile and Mexico and the Portuguese group in Brazil as well as in the United States.
A major shareholder in one of the two firms, said that "The combination of the two companies is quite attractive as Gas Natural lacks power generation in Latam and renewables. But the key to the deal is the politics."
EDP declined to comment. Gas Natural said it was not in merger talks with EDP.
CROSS-BORDER DEALS
Any attempt to consolidate Europe's fragmented energy market has so far raised eyebrows among European competition authorities who fear it could translate into higher prices. But sector insiders say the mood for cross-border deals has changed since the French election victory of Emmanuel Macron who has been a strong advocate of creating European champions.
Meanwhile, Spain's prime minister Mariano Rajoy and his Portuguese counterpart Antonio Costa, are working on increasing connections between the energy grids of the two countries and with Europe and none of either group's main shareholders is seen as raising objections if the price is attractive.
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Source : Reuters