Spanish Gas Supplier Launches Endesa Takeover Bid

The Spanish power firm Endesa was today considering an unsolicited €22.7bn (£15.3bn) offer from Gas Natural, Spain's largest natural gas supplier, that would create one of the world's largest utilities.

Endesa's chief executive, Rafael Miranda, is expected to lead a defence as fierce as that put up by Iberdrola when Gas Natural unsuccessfully sought to acquire that company two years ago.

Spain's socialist government, which took office last year, has come out in favour of utility mergers because changes in European law, starting in 2007, will increase competition.

Europe has seen a flurry of mergers in the utilities sector over recent months. The Greman firm E.ON, Europe's largest publicly traded power company, yesterday said it may bid for Scottish Power, a UK utility with a market value of £11bn.

Shares in Scottish Power, the UK's fifth-largest energy provider, today rose by as much as 6.1% after E.ON confirmed it was considering a bid.

The French utilities group Suez last month offered €11.4bn to buy the 50% of Belgium's Electrabel that it does not own.

Gas Natural's bid would involve the sale of as much as €9bn of Endesa assets to win antitrust approval.

It would sell the French utility Societe Nationale d'Electricite et de Thermique, certain plants in Italy and distribution companies.

Iberdrola, Spain's second-largest power company, agreed to buy assets from the resulting company worth between €7bn and €9bn, Gas Natural said.

Gas Natural is trying to expand into electricity to compensate for a declining domestic gas market share.

For more than two years, it has sought to build a power and gas company capable of competing with E.ON and Electricite de France - utilities more than twice the size of any provider in Spain.

The Spanish government will not place barriers in the way of Gas Natural's move, the El Pais newspaper reported.

El Pais, which backs the socialist government, cited sources close to the industry ministry, which will oversee the deal. It said the government would not interfere so long as regulators approved the deal and it did not harm consumers.

The conservative opposition Popular party raised concerns about the possible takeover. "It could put the competitive balance of the markets and the interests of consumers at serious risk," Miguel Arias Canete, the party's shadow economy minister, said.

When the PP was in power, it opposed Gas Natural's hostile €15bn bid for Iberdrola, which was withdrawn in 2003. The difference this time was that the socialists were in favour of creating a national champion, El Pais said.