UPDATE 6-France's EDF agrees $23 bln bid for British Energy

(Adds detail on mkt share)

By Vanessa Walters and John Bowker

PARIS/LONDON, Sept 24 (Reuters) - French utility EDF (EDF.PA) agreed a 12.5 billion pound ($23.14 billion) bid for British Energy BGY.L, sweetening its bid to control Britain's nuclear power industry after months of wrangling.

EDF, the world's biggest producer of nuclear energy and already the fifth largest electricity supplier in the UK, said on Wednesday it was offering 774 pence per British Energy share, or an alternative of 700 pence in cash plus one nuclear power note, a financial instrument linked to BE's future performance.

EDF, valued at $135 bln, predicted the deal would lead to cost savings of 200 million euros ($293 million) and lift group earnings in 2009. It said it had assurances from British Energy investors it would get at least 45.16 percent of the utility.

"Both the government and our largest shareholder, Invesco Perpetual, have provided commitments to accept the offer," British Energy Chief Executive Bill Coley told reporters.

The new offer is worth just 9 pence a share more than one rejected as too low by shareholders Invesco and M&G, which own around 22 percent of the company. The British government, which owns 35 percent, had accepted the earlier proposal.

The government became a part-owner of British Energy in 2003 after saving the company from collapse. It is responsible for around 20 percent of Britain's electricity supply.

For EDF, the takeover allows it to benefit from the growing British nuclear market where it plans to build four European Pressurised Reactors (EPR), kick-starting a new wave of nuclear building in the country.

Britain's nuclear power plants provide 19 percent of the country's electricity. However, all but one are due to close within 15 years.

"It will result in major investments but EDF can handle it," said Michael Sellam, fund manager at Iris Finance in Paris whose whose firm holds EDF shares.

The deal prompted Natixis analysts to raise their recommendation on EDF shares to "buy" from "reduce" saying the acquisition made "great industrial sense".

British Energy shares rose as much as 7.4 percent to 777.50 pence and were up 6.15 percent at 768.50 pence at 1426 GMT. EDF was 4.2 percent higher at 52.25 euros.

"It is positive for EDF and takes away the risk that they will pay off the wall, and the price is reasonable," a London-based analyst said. "There is clearly value in nuclear and building nuclear plants but it is quite long-term."

SWEETENER

Reluctant shareholders may have been won around by the option to receive a nuclear power note which means they stand to profit if, as they suspect, BE's earnings are boosted in the long-term by energy prices remaining high.