December 6, 2010 / 4:38 PM / 7 years ago

UPDATE 3-German state buys EDF's EnBW stake; EDF to cut debt

* EDF to sell 45 percent stake in EnBW at 41.5 euros/share

* EDF to sell stake to German state of Baden-Wuerttemberg

* Transaction valued at 4.7 billion euros

* State plans to resell its stake on the stock market

* EnBW shares rise 17.2 percent in thin volume (Recasts lead, adds comments, details)

By Peter Dinkloh

FRANKFURT, Dec 6 (Reuters) - The southern German state of Baden-Wuerttemberg is buying EDF’s (EDF.PA) stake in peer Energie Baden-Wuerttemberg (EnBW) (EBKG.DE) for 4.7 billion euro ($6.2 billion), helping the French utility to cut debt.

Baden-Wuerttemberg agreed to buy EDF’s 45 percent stake for 41.50 euros a share and is offering remaining shareholders the same price, the state’s government said on Monday.

The offer is unlikely to be taken up by another 45 percent shareholder, the OEW grouping of municipalities.

The transaction will help EDF cut debt by 7 billion euros, the French power provider said.

“The resulting increased financial flexibility will contribute to its development in Europe and internationally,” EDF said. The power generator may make acquisitions and plans to develop its presence in Germany in a different way, it said.

EnBW is EDF’s only holding in Germany, Europe’s largest power market, but the utility had “difficult” negotiations over its dealings with OEW and the energy market in the country was “challenging”, EDF said.

OEW does not plan to sell its stake, Baden-Wuerttemberg’s government said.

    EnBW is set to be burdened more than its German peers E.ON (EONGn.DE) and RWE (RWEG.DE) by a tax on nuclear fuel as a larger share of its production is generated using nuclear power plants than its peers.

    The divestment is part of a string of asset sales as EDF faces billions of euros of investments in nuclear power plants in Britain and as it tightened its target for debt to be close to 2.5 times earnings before interest, taxes, depreciation and amortisation (EBITDA), after previously allowing as much as 3 times.

    EnBW’s thinly traded shares jumped 17.4 percent to 41.09 euros by 1628 GMT, EDF closed up 0.55 percent at 31.62 euros. Some 1.9 percent of EnBW’s shares are freely traded while the remainder is owned by other local communities in the state.

    The state is buying the 45 percent stake in order to resell at least a "significant" part on the stock market so that the company becomes part of the DAX index .GDAXI of Germany's largest listed companies, the state's government said on Monday.

    State Premier Stefan Mappus said the sale prevented another foreign buyer from possibly acquiring a stake in EnBW, without identifying the suitor.

    A spokesman for the state government did not provide a reason why the government had to buy the stake in order to sell the shares on the stock market and why EDF did not sell shares directly on the market.

    “There would have been uncertainty in coming months. We wanted to prevent that,” the state government said in its statement.

    Baden-Wuerttemberg is becoming a shareholder in EnBW again after selling a 25 percent stake to EDF some 10 years ago. (Additional reporting by Matthias Blamont in Paris; Editing by David Cowell) ($1 = 0.7541 euro)

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