German utility E.ON conceded April 2 that its bid for a majority stake in Spanish utility Endesa was likely to fail and agreed instead to split up Endesa’s global holdings with two big Endesa shareholders, Italian utility Enel and Spanish construction company Acciona.
E.ON agreed to abandon its 42.3 billion euro ($56.5 billion) bid for Endesa, instead striking deals to buy 10 billion euros (US$13.35 billion) of power plants and other assets. The deal is to give Enel a strong grip over Endesa’s business in Spain and Latin America while most of Endesa’s other European assets will be sold to E.ON.
Enel Chief Executive Fulvio Conti said April 3 the companies could wrap up the deal by July.
Italian Prime Minister Romano Prodi said he was satisfied with the deal, while Spanish Industry Minister Joan Clos said the compromise was acceptable as it did not break up Spanish assets, signaling Madrid would not start a legal row.
“Both companies, in particular E.ON, get an honorable deal,” said Armando Iobbi, an analyst with Centrosim. “Enel will get a major focus in Spain and greatly extend its activities in Central and South America.”
Enel ups presence in Spain, Americas; E.ON builds in Europe
Under the terms of the deal E.ON is to take over 70 percent of Endesa’s assets in Italy while the remaining 30 percent will go to local Italian utility ASM Brescia, a financial source said. The source also said Enel, Italy’s biggest power utility, was discussing the sale of its Spanish unit Viesgo to E.ON for about 2 billion euros (US$2.67 billion).
The plants of Endesa’s French coal-fired generator SNET will go 65 percent to E.ON and 35 percent to the Italians, the source said.
Endesa, Spain’s leading electrical company, is a key utility in Chile, Argentina, Colombia, and Peru and has business in Brazil.
Enel is present in Spain with Viesgo, which has about 2,200 MW of installed capacity and with Enel Union Fenosa Renovables, active in the wind and hydropower sector. Enel is also a key player in Latin America for renewable energy, with operations in Panama, El Salvador, and Brazil.
While Spain finds the deal acceptable because it preserves Endesa’s Spanish assets from a break-up, the European Commission is suing Madrid for what it sees as illegal restrictions on E.ON’s bid for Endesa.
European Union Competition Commissioner Neelie Kroes said setting conditions breached the commission’s exclusive jurisdiction over reviewing cross-border deals. It had already approved the proposed E.ON deal without restrictions.