Electricite de France SA Thursday was nearing an agreement to acquire U.K. nuclear-power generator British Energy Group PLC, in a deal that could exceed GBP 12 billion ($23.99 billion) and end a months-long takeover saga, people familiar with the matter said.
The companies are in the final stages of discussions that could yield an agreement next week, the people said. Should a deal be reached, EDF would turn around and sell a stake of 20% to 25% in British Energy to Centrica PLC, the U.K.'s largest retail energy supplier, one of the people said. British Energy confirmed it is in "advanced discussions" with a party it didn't name.
The deal would be the latest in a wave of consolidation of Europe's power sector. In a separate development Thursday, Spanish gas supplier Gas Natural SDG SA said it was in talks to buy a majority stake in utility Union Fenosa SA. That deal would create one of Europe's biggest energy groups.
British Energy's share price closed up 6.2% Thursday to 728.5 pence, giving the company a market value of about GBP 11.5 billion. A deal would value British Energy at GBP 11.8 billion to GBP 12.6 billion, one of the people said. The low end of that range would equate to a slight premium to the current market price, or about 745 pence.
Depending on how the deal is structured, EDF may need the approval of British Energy's minority shareholders, some of whom have indicated a price of less than 750 pence wouldn't be acceptable to them. British Energy indicated in early June it wouldn't accept less than 735 pence a share.
British Energy has been in play since March, when the U.K. government signaled it might sell its 35% stake in the company. The government is eager to raise cash and foster the development of nuclear power in the country as it seeks to reduce carbon emissions and dependence on imported fossil fuels. Nuclear power helps meet about 20% of electricity demand in the U.K.
After a flurry of early interest from a number of large European utilities, including Spain's Iberdrola SA and Germany's RWE AG, EDF was the only bidder to show up by a May 9 deadline. EDF plans to launch the bid following a meeting of its board on July 31, one person said. The company is scheduled to report earnings the next day.
EDF owns 58 nuclear power plants, more than any other company in the world. Britain is eager to import EDF's nuclear expertise, but the deal is politically sensitive in part because EDF is controlled by the French government. Centrica's participation is designed in part to make the deal more politically palatable in the U.K.
EDF, which already owns power-generation assets in the U.K., is mainly interested in British Energy to gain access to the sites adjacent to existing reactors that are earmarked for new nuclear construction. Centrica is interested in the output from British Energy's eight existing nuclear plants. By taking a stake in British Energy, Centrica would increase its power-generation capacity, an area in which it lags competitors such as E.On AG and RWE. The stake would allow Centrica to mitigate its exposure to volatile gas prices.