GDF Suez takes full control of International Power
Paris, April 16, 2012
French utility GDF Suez took control of Britain's International Power on Monday through a sweetened offer of 6.4 billion pounds ($10.2 billion), leaving the world's biggest independent power producer better placed to win contracts in fast-growing emerging markets.
The deal comes a few weeks after IPR turned down as too low an earlier offer GDF Suez had made to buy out the remaining 30 percent of the company it did not already own.
In order to finance the deal, GDF said it would tap bank lenders and sell an additional 3 billion euros worth of assets located primarily in mature markets, on top of 10 billion euros in assets it had originally planned to sell by 2013.
GDF Suez conducted the acquisition in two stages, keen to prevent its debt from increasing too significantly and to preserve its A credit rating. It has completed two thirds of its earlier asset disposal plan.
GDF Suez estimated that increased profit contributions from the takeover would lift its earnings by as much 9 percent to 4.2 billion euros.
Greater competition and regulation in mature energy markets in Europe, bogged down by the economic crisis, have steered GDF Suez's focus to developing markets where energy needs are growing fast. The International Energy Agency forecasts overall energy demand to grow by 40 per cent between 2009-2035, the bulk of which is seen outside industrialised nations.
The purchase of IPR will boost GDF Suez' presence in regions where energy demand is growing, such South America, the Middle East, South-East Asia and Australia, and buying out the remaining stake will simplify the group's structure.
The IPR acquisition in 2010 added 35 gigawatts in electricity production capacity worldwide, or the equivalent of 35 small nuclear reactors, to a total of 117 GW today at GDF Suez. Some 15 GW are currently being built and International Power's pipeline of large projects is expected to deliver a contribution to earnings between 2014 and 2017.
The 418 pence per share offer, at a 7 percent premium to an earlier approach by GDF, values IPR at about 21.3 billion pounds ($33.8 billion).
GDF said the offer valued the entire issued and to be issued share capital of IPR at about 22.8 billion pounds, assuming full conversion of IPR's Convertible Bonds and exercise of share options.
In the medium term, GDF intends to increase its guidance for investments in fast growing markets to 40 to 50 percent of the total, up from 30 percent now, helping the group with its target to build 90 MW in installed capacity out of Europe by 2016.
"It represents a significant shift in GDF Suez and to a certain extend a change of identity," the group's chief executive officer Gerard Mestrallet told a news conference.
Analysts have said a deal would make good strategic sense for GDF given IPR's strong growth prospects. - Reuters