International Power PLC's (IPR.LN) shares surged more than 11% Monday morning after confirmation that the U.K.-based company resumed talks to merge energy assets with French power company GDF Suez SA (GSZ.FR).
International Power PLC's (IPR.LN) shares surged more than 11% Monday
morning after confirmation that the U.K.-based company resumed talks to merge
energy assets with French power company GDF Suez SA (GSZ.FR).
At 1058 GMT, International Power's shares were up 30 pence, or 9.6%, at 347
pence, leading
London
's
FTSE 100 index. At 1035 GMT, GDF Suez's shares were up EUR0.41, or 1.7%, at
EUR24.73, among the highest gainers on
France
's
CAC-40 index.
The two companies earlier Monday confirmed they are in talks to merge assets
outside of continental
Europe
in a
deal that would make GDF Suez the majority shareholder in International Power. The
combination of International Power and GDF Suez Energy International would
create an enlarged International Power to be traded on the main market of the
London Stock Exchange.
Talks are only at a preliminary stage and the two companies said there is no
certainty they will lead to an agreement. The discussions are continuing on the
terms of the possible tie up, including the amount of debt that GDF Suez's
international business would carry into the deal, the French company said.
Earlier discussions between the companies fell apart in January when they
couldn't agree on terms.
Even with the caveats, International Power's said "the possible
combination warrants consideration given the strategic rationale and potential
for synergies."
International Power released a 103-page statement on the proposed merger and
GDF Suez has created a section on its web site dedicated to the transaction,
suggesting the deal will go ahead, Barclays Capital analyst Neil Beddall said
in a note.
Analysts also underlined potential cost savings and the strategic fit. The deal
would mainly involve operating power plants in emerging markets, which is one
of the few areas of real growth for generators, UBS analyst Per Lekander said. UBS
has a buy rating on GDF Suez.
Cheuvreux analysts Damien de Saint-Germain and Benoit Trochu said GDF Suez's
balance sheet would be able to back International Power's project pipeline. They
also noted that the deal would give GDF Suez a footprint in the
U.K.
ahead
of an expected push to build new capacity in the country.
The deal could also help the new company land new deals--Evolution Securities
analyst Lakis Athanasiou said International Power has been unsuccessful in the
last two years in gaining new projects in the
Middle
East
and may benefit from better French relationships there.
The companies didn't release financial details of the possible deal. The Mail
On Sunday reported that GDF Suez was planning a GBP6.4 billion cash offer for
International Power, while the Financial Times reported Monday that the deal
could involve a cash pay-out to International Power shareholders.
GDF Suez declined to comment on the press reports. The French company said in
its statement that if the combination were to be completed, it is expected that
shares in International Power would be issued to GDF Suez.
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