(Corrects paragraph 11 to say revenue figure is for GDF Suez
group, not International Power alone)
* GDF to put assets into IPR, will own 70 pct of new company
* Deal creates the world's largest power producer
* Intl Power estimated market cap 18.6 bln stg post-deal
* IP stock down 2.9 pct, GDF stock down 0.7 pct
* IP credit spread tightens 18 bps
(Adds Evolution analyst, detail from press conference)
By Victoria Bryan and Peter Dinkloh
LONDON/FRANKFURT, Aug 10 France's GDF Suez
GSZ.PA will take control of Britain's International Power
IPR.L, creating the world's largest utility with annual
revenue of 84 billion euros ($111.5 billion).
The deal comes after resuming talks aborted earlier this
year and will allow GDF access to growth in emerging markets and
give it a foothold in the UK and Australia.
Britain's International Power can expect to cut financing
costs as a result, anticipating its credit rating to be lifted
to investment grade, from BB now, it said on Tuesday.
"This is one of the few utility combinations that have
always made sense, regardless of the economic environment," said
a London-based analyst, who declined to be identified.
The deal is another example of a foreign player entering the
British power market -- where just two of the 'Big Six'
household energy suppliers are controlled by domestic firms --
and follows the 2008 sale of British Energy to EDF (EDF.PA).
GDF Suez will transfer a number of assets into International
Power, in return for 70 percent of the ownership in the new
enlarged group. Existing International Power shareholders will
hold the remaining 30 percent.
International Power shareholders will also receive a special
dividend of 92 pence per share, totalling 1.4 billion pounds --
at the top end of analyst expectations -- in exchange for
relinquishing control of the company.
GDF declined to comment on the value of the deal, which
analysts found hard to assess because the value of the assets
that GDF is transferring is not public.
International Power will stay listed and based in London and
will have a market value of 18.6 billion pounds after the deal,
based on its current share price.
Evolution analyst Lakis Athanasiou estimated GDF was paying
425 pence per share -- or 4.82 billion pounds -- for its
70-percent stake, based on GDF's share of the assets being
transferred, expected synergies and the dividend.
The expanded International Power group will have generating
capacity of over 66 gigawatts (GW), and revenue for GDF Suez
would stand at 84 billion euros after the deal.
The GDF assets will be transferred into the British firm
with net debt of 4.4 billion euros, the companies said.
GDF Chief Executive Gerard Mestrallet, who had been keen to
avoid paying cash for the deal, said GDF would look to dispose
of between 4 and 5 billion euros of assets to offset the
negative effects of the deal on the group's balance sheet.
International Power's top management, including CEO Philip
Cox, a keen soccer fan, and Financial Director Mark Williamson,
would retain their positions within the new company.
For a FACTBOX on the assets involved, click [ID:nLDE66I0B2]
For a GRAPHIC see
For a GRAPHIC on league tables
For a BREAKINGVIEWS click on [ID:nLDE6790LO]
For a story about GDF debt, click on [ID:nLDE67916V]
INTERNATIONAL POWER SPREAD TIGHTENS
The two companies had worked through the night to get the
deal announced on the day they both reported forecast-beating
GDF shares were 1.36 percent lower at 26.42 euros at 1355
GMT, while International Power shares lost 2 percent at 372.4
pence. The STOXX Europe 600 utilities index .SX6P was 0.7
"Only GDF Suez' good results and the fact that the deal
makes so much sense is disguising the fact that the transaction
is lowering the value of the GDF Suez share somewhat," said one
London-based analyst, who declined to be named.
The five year credit default swap on International Power
tightened by 18 basis points, to 155 bps as investors
anticipated its improved rating outlook. GDF widened just 5 bps
to 91 bps on the news.
The deal comes as energy providers recover from the slump in
demand caused by the global recession.
"In term of reduction of revenues, we have clearly bottomed
out. We see some positive signs of market recovery, even if they
still need to be confirmed," Jean-Francois Cirelli,
vice-chairman and president of GDF Suez, said.
Leading International Power shareholder Neil Woodford, who
holds an 11.2 percent stake through his Invesco Perpetual funds,
said he backed the deal. [ID:nWLA0518]
The companies said they had identified synergies of 165
million pounds per year, expected to be achieved by the sixth
year following completion.
The deal is expected to complete at the end of 2010 or early
2011, subject to regulatory approval and consultation with
employees, the companies said.
International Power is being advised by JP Morgan Cazenove,
Morgan Stanley and Nomura, while GDF's advisers are Rothschild,
Goldman Sachs, BNP Paribas, Ondra Partners and Blackstone.
(Writing by Douwe Miedema, additional reporting by Victoria
Howley in London and Michel Rose in Paris; Editing by Louise
Heavens and Jon Loades-Carter)