The long-stalled merger between utility giant Suez SA and state-owned Gaz de France (GDF) has been approved after the boards of both companies agreed to new conditions, the two companies said yesterday.
The new company, called GDF Suez, will have a combined market value of 90 billion euros (US$123.3 billion) and revenues of 72 billion euros, making it one of the top three listed utilities worldwide, GDF and Suez said in a joint statement.
Suez CEO Gerard Mestrallet will be chairman and chief executive of the new entity, while GDF CEO Jean-Francois Cirelli will become vice chairman and president. The transaction will close "as early as possible" next year.
PHOTO: AFP
"Recent developments in the energy sector reinforced the strategic and industrial logic behind the transaction" which creates a "global energy leader," both firms said.
Under the new deal brokered by French President Nicolas Sarkozy in a frenzy of weekend negotiations, the government will hold 35 percent of GDF Suez. The original merger plan, announced in February last year, had been tangled in political, legal and financial problems for 18 months.
To enable a "merger of equals" on the basis of a share exchange ratio of 21 GDF shares for 22 Suez shares -- and to allow the merged company to focus on the energy market -- Suez will spin off its environment activities in an initial public offering. The water and waste division had sales of 11.4 billion euros last year.
The sale of Suez Environment also evens out the companies' worth as the shares of both companies diverged since the original deal was announced. As of Friday, Suez's market capitalization was about 54 billion euros and 36 billion euros for GDF.
Shares in Suez Environment -- a major player in North American and other global water and waste markets -- will be sold to the public in an initial public offering.
Approximately 65 percent will be distributed to Suez shareholders, leaving the company 35 percent owned by GDF Suez, with another 12 percent held by a coalition of shareholders, including banking giant Credit Agricole and state-run nuclear manufacturer Areva.
Supporters say the union will help ease European energy concerns in the coming decades. Analysts say the merger plan makes more financial sense with the sale of Suez's environment activities.
Critics outside France call the merger protectionist since it was originally designed to fend off a hostile bid for Suez from Italy's Enel SpA. French unions oppose the merger -- both the original and updated versions _ because it requires privatizing GDF.
The state owns 79.8 percent of the natural gas company and will reduce its share to 35 percent for the merger. The new terms still must be approved by shareholders.
Suez main shareholders have "indicated their intention to vote in favor" of the deal in an extraordinary meeting, the statement said.
Sarkozy, after earlier casting doubt on the merger, gave it new life last week and has spent recent days working out new terms for the deal.
France's opposition Socialists -- in disarray at their annual post-summer meeting after the fallout from losing this year's elections -- have been leading opponents of the merger. Party leader Francois has criticized Sarkozy for reviving the merger despite having promised as finance minister in 2004 not to privatize GDF and accused him of ignoring critics in pushing for the merger.
"It's not a good way to do things," Hollande said at a party meeting on Sunday. "We need transparency, and we also need strategy, not simply the good will of the prince."
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