E.ON drops Endesa bid amid protectionism concerns

The German energy giant dropped its €42.4 billion offer for Endesa, ending an 18-month battle that saw E.ON’s bid for the Spanish utility thwarted by repeated government intervention.

E.ON AG announced late on 2 April2007 it had reached an agreement with Italy’s Enel and Acciona, a Spanish construction and energy conglomerate, to acquire parts of Endesa.

“Acciona’s and Enel’s involvement in Endesa has made our original goal of acquiring a majority stake in Endesa impossible,” said E.ON’s Chief Executive Wulf Bernotat in a statement. Buying a minority stake, he said, would have only led to “stalemate” for shareholders and would have triggered “unpredictable lawsuits”.

The German energy giant had recently launched legal proceedings against Acciona and Enel, which announced ten days ago their intention to launch a rival bid to acquire the Spanish utility. The bid valued Endesa at €43.4 billion, higher than E.ON €42.4 billion offer.

In exchange for withdrawing its offer, E.ON will receive a portfolio of assets in Spain, Italy, France, Poland and Turkey if Enel and Acciona take control of the Spanish utility as expected. The portfolio, valued at €10 billion, includes the acquisition of Spanish power utility Viesgo from Enel, a move that E.ON says will make it the fourth largest player on the Spanish market by 2010 following a planned upgrade of generation capacity.

Reports of a pending joint offer by Enel and Acciona surfaced after high-profile meetings between Spain’s Prime Minister José Luiz Rodriguez Zapatero and his Italian counterpart Romano Prodi earlier this year.

Spain had opposed the deal from the beginning, originally supporting a rival offer by Gas Natural to create a national energy champion and keep assets deemed strategic by the Spanish government.

E.ON’s bid was approved a year ago by Competition Commissioner Neelie Kroes (EURACTIV 25/04/06) but has been stalled because of Spanish rules that discourage takeovers from foreign companies. In the latest development, on 28 March 2007, the Commission had referred Spain to the EU Court of Justice for violating EU merger laws (EURACTIV 29/03/07).

Spanish Industry Minister Joan Clos met with EU Competition Commissioner Neelie Kroes on 2 April to avoid a court case over what the Commission saw as protectionist moves by Spain to block E.ON’s bid.

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