PARIS (AP) — Utility giant Suez SA and state-owned Gaz de France agreed yesterday to new terms for a long-stalled merger that would create a global energy behemoth minority-owned by the French state, an official said.
Both companies’ boards met last night and approved an outline of the new deal, said a participant in the meeting who spoke on the condition of anonymity because of the sensitivity of the talks. The companies are expected to release financial details of the plan this morning.
Suez will shed most of its water and waste division under the new terms, brokered by French President Nicolas Sarkozy in a frenzy of weekend negotiations. The original merger plan, announced in February 2006, has been tangled in political, legal and financial problems for 18 months.
The merged entity, called GDF-Suez, would be worth about $110 billion, presidential spokesman Claude Gueant said. He said the new terms give the state a greater say than the earlier deal.
Supporters say the union will help ease European energy concerns in the coming decades. Analysts say the merger plan makes more financial sense with the sale of Suez’s environmental activities.
Critics outside France call the merger protectionist, since it was originally designed to fend off a hostile bid for Suez from Italy’s Enel SpA. French unions oppose the merger — both the original and updated versions — because it requires privatizing GDF.
The state owns 79.8 percent of the natural-gas company and would likely reduce its share to about 34 percent for the merger. The new terms still must be approved by shareholders.
Mr. Gueant countered criticism of the privatization, saying on LCI television that the state “remains the biggest shareholder by far.”
Finance Minister Christine Lagarde said the merger would create a “global champion” that would likely be the world’s third-largest energy distributor.
Mr. Sarkozy, after earlier casting doubt on the merger, gave it new life last week and has spent recent days working out new terms for the deal.
He demanded that Suez shed its environmental division so that the merged company could focus on the energy market. The sale of Suez Environment also evens out the companies’ worth, making it more of a marriage of equals. As of Friday, Suez’s market capitalization was about $74 billion, compared to $49.3 billion for GDF.
Yves Montobbio, a senior representative of the CGT union at Suez, said that under the new plan, Suez Environment would be spun off as a publicly owned company and its shares would trade on the stock market. After that, Suez’s energy operations would be merged with Gaz de France.
Suez Environment — a major player in North American and other global water and waste markets — would be 34 percent owned by Suez, with another 14 percent held by a coalition of shareholders including banking giant Credit Agricole and state-run nuclear manufacturer Areva, Mr. Montobbio said.
“They are asking us to have confidence in capital markets,” he said.
France’s Socialists have been leading opponents of the merger. Party leader Francois Hollande criticized Mr. Sarkozy for reviving the merger despite having promised as finance minister in 2004 not to privatize GDF.
“It’s not a good way to do things,” Mr. Hollande said at a party meeting yesterday.
“We need transparency, and we also need strategy, not simply the good will of the prince.”
Please read our comment policy before commenting.