Spain's Iberdrola SA (IBE.MC) and Electricite de France (1024251.FR) Wednesday indicated that they're gearing up for a takeover battle that may reshape Spain's power utility industry, ahead of the general elections to be held here on March 9.
With both Iberdrola and EdF - Spain's and France's largest utilities by market value - reporting fourth-quarter earnings Wednesday, the top managers of the two companies took advantage of meetings with journalists and analysts to elaborate on their recent statements about a possible EdF move into Spain.
EdF, a state-controlled company, is widely believed to be ready to team up with Iberdrola's top shareholder - Spain's construction firm Actividades de Construcciones y Servicios SA (ACS.MC) - for a move into Iberdrola, seeking to oust the current Chairman, Ignacio Galan.
EdF has recognized it is looking at Iberdrola and other Spanish utilities. Speculation has recently focused on either an Iberdrola takeover bid from EdF, or the acquisition of a large Iberdrola stake, as part of a larger deal with ACS that may include Union Fenosa SA (UNF.MC), Spain's number three power utility, controlled by ACS.
On Wednesday, Galan said that EdF "is not welcome" at Iberdrola, adding that the the company has standalone appeal and its current management team has support from key shareholders to keep it independent.
Galan went on to criticize EdF's status as a company controlled by the French state, saying that it breaches European Union rules for free competition within the bloc. He also blasted recent EdF statements that it won't move into Spain if not allowed to do so by the local government. "I find it funny that a businessman says that to do something he needs the support from a given government," he said. "We're talking about a company whose top manager is appointed by the president of the French republic."
Earlier Wednesday, EdF Chief Executive Pierre Gadonneix had said at a separate event that EdF is still studying a possible deal in Spain, but doesn't yet know how it will act.
EdF, Gadonneix said, has been attentive for some years to the restructuring it sees in European power utilities, and the company's decision not to get involved in a previous flurry of interest in Spain's Endesa SA (ELE.MC) was a "choice."
Still, EdF is willing, if it is welcome and if a deal will create synergies and boost shareholder value, to take part in a new round of interest in Spain's energy sector, he said.
Gadonneix also declined to comment as to whether EdF may be interested in Union Fenosa (UNF.MC).
Several Spanish analysts said that, even as EdF's plans remain murky, the current situation is bound to provide support for Iberdrola's shares.
"On the short term - that is, after the (March 9) elections - we believe that the current M&A speculation should stay as a driver for share prices across the sector," said Antonio Cruz, analyst with Banesto Bolsa.
At 1032 GMT, Iberdrola shares were up EUR0.01, or 0.1% at EUR10.28. They're flat this year, outperforming Spain's benchmark IBEX-35 index, and 30% above the level they were trading at before the first speculation of EdF's plans surfaced in Spanish and U.K. media reports.
Earlier Wednesday, Iberdrola posted a 57% increase in fourth-quarter net profit to EUR740.7 million, driven by the consolidation of the U.K.'s Scottish Power, acquired last year.
EdF posted a 0.2% rise in net profit to EUR5.62 billion, from EUR5.6 billion in 2006. EdF earnings before interest, taxes, depreciation and amortization, or Ebitda, rose 5.7% to EUR15.21 billion, from EUR14.39 billion the previous year. EdF said that represents organic growth of 6.1%. However, the group didn't increase its profit guidance.
EdF shares traded down 4.6%, or EUR3.42 lower, at EUR70.65, at 1126 GMT, in a lower overall French market