French state-controlled electricity group Electricite de France (1024251.FR) will offer to buy a 35.2% stake in British Energy PLC (BGY.LN) at a price of 765 pence a share for total consideration of about EUR16.5 billion, a person close to the discussions told Dow Jones Newswires on Tuesday.
The offer is partly in cash and partly in contingent value rights, or CVRs, the person said - which would work out to EdF paying EUR15 billion in cash and EUR1.5 billion in CVRs.
"EdF has no financial structural issues; they can afford such an amount in cash," the person said.
"They secured a syndicated line for the cash part of the bid," the person added. "That's been a tad tricky because of current liquidity issues on financial markets. So EdF had to secure the line with numerous banks - that's somewhat expensive."
EdF's board is to meet Thursday and is expected to formally launch the bid for British Energy at that time, the person said.
EdF declined to comment Tuesday night.
The U.K. government aims to kick-start a new generation of nuclear power plants by selling its 35.2% stake in British Energy, which operates more than 90% of the U.K.'s nuclear electric-generating capacity and has the best sites for new reactors.
Purchase of the government's stake would automatically trigger an offer for the whole company.
British Energy shares closed Tuesday down 4 pence, or 0.6%, at 723 pence.
A successful offer for British Energy would position EdF to lead the U.K. power sector. EdF has said it aims to build up to five nuclear reactors in the U.K.
Once it makes a formal offer, however, EdF may still face anti-trust concerns, reluctance by some shareholders to sell at the offer price and political opposition.
The head of gas and electricity market regulator Ofgem said June 17 that competition issues would likely arise if any of the big six U.K. utilities, including EdF's U.K. arm EdF Energy, bought British Energy.
Executives at other U.K. power generators have expressed concern at the prospect of a larger utility buying all of British Energy.
The six largest U.K. utilities - EdF Energy; Centrica (CPYYY); Npower, a unit of RWE AG (RWE.XE); Iberdrola SA (IBE.MC) subsidiary Scottish Power; Scottish and Southern Energy PLC (SSN.LN); and the U.K. arm of E.ON AG (EOA.XE) - currently have 50%-60% of power generation capacity.
British Energy, with around 16% of the U.K.'s electric generating capacity, is the largest power generator without its own customers, and is the biggest seller on U.K. wholesale markets. Independent power producers and suppliers worry that a takeover would remove this electricity from wholesale markets.
The U.K. Parliament's Business and Enterprise Select Committee also has expressed concern that a takeover of British Energy could undermine the wholesale power market.
EdF also faces the challenge of persuading shareholders to sell at its intended offer price, even though plant maintenance problems and a recent fall in the oil price may provide a counterweight to the highest valuations of British Energy.
Evolution Securities said July 24 that British Energy's management would be selling out its shareholders' interest if it accepts a bid of 750-775 pence a share from EdF. Evolution has a 920 pence target price for British Energy.