UPDATE 7-EDF to buy out renewables unit minorities

Fri Apr 8, 2011 4:31pm BST

Quotes

   

* Offers 40 euros-share, 10 pct premium

* EDF to buy back 300 mln-1 bln euros in shares

* Bid comes amid anti-nuclear backlash

* Shares earlier suspended at companies' request

(Adds fund manager comment, details)

By Benjamin Mallet

PARIS, April 8 (Reuters) - France's EDF (EDF.PA) offered to buy out minority shareholders in its solar and wind power unit for about 1.5 billion euros, aiming to capitalise on growing utility industry nerves about Japan's nuclear crisis.

EDF, the world's largest listed nuclear energy producer, on Friday offered 40 euros ($57.61) a share for the 50 percent of its alternative power subsidiary EDF Energies Nouvelles EEN.PA that it does not already own.

EDF also said it would buy back up to 1 billion euros of shares to minimise dilution to existing shareholders from the deal, which the utility said would allow it to "fully benefit from the future value creation of renewable energies."

EDF, whose stock has been slammed in recent weeks by concern about its reliance on nuclear energy and political pressure to limit domestic price hikes, would become the latest utility to increase exposure to alternative energy after Spain's Iberdrola.

The offered price represents a 10.4 percent premium to Thursday's closing price of the renewables unit, which has a market value of 2.8 billion euros ($4 billion).

The transaction mirrors an offer last month by Spanish group Iberdrola (IBE.MC) to buy out minority shareholders in Iberdrola Renovables IBR.MC. [ID:nLDE7271YK] [ID:nLDE72L2H4]

Herve Mangin, a fund manager at Axa (AXAF.PA), said the EDF and Iberdrola minority buyouts showed how the trend of separate listings of utilities' renewable energy divisions was a thing of the past.

"The deal is clearly positive for EDF but remains relatively marginal given the scale of the company," he said. Mangin's fund does not hold EEN shares, but other funds at Axa do.

NUCLEAR WOES CITED

Iberdrola announced an all-share bid on March 8 to buy out the 20 percent of its Iberdrola Renovables unit it listed in 2007 at nearly half the price the green unit debuted at.

But while the Spanish utility's offer was well timed to take advantange of Renovables depressed share price, the EDF offer would come at a time when shares in its alternative energy unit have been rallying thanks to the Japan crisis, while EDF hit multi-year lows earlier this week.

"This doesn't make strategic sense," said one Paris-based trader before the announcement. "It's more of a media-oriented deal in the context of nuclear falling out of favour."

EEN in February forecast a rise of at least 23 percent in earnings before interest, taxes, depreciation and amortisation (EBITDA) to 560 million euros in 2011.

Shares in EDP Renovaveis (EDPR.LS), a similar Portuguese company, were up 3.2 percent in early afternoon trade.

"Thanks to the deal, EEN would get a better access to fund its growth prospects as its leverage is currently high," Cheuvreux analyst Damien de Saint Germain said in a note.

State-controlled EDF generates the vast majority of its power from nuclear plants.

Its shares have lost 15 percent since the Mar. 11 Japan earthquake, including 7.3 percent since Tuesday when France said it was limiting an upcoming electricity price hike to 1.7 percent -- far less than the roughly 5 percent EDF had sought.

France's Mouratoglou Group, which owns 25 percent of EEN, has already agreed to the 40-euro per share tender offer, EDF said.

But some EEN shareholders did not think the premium was high enough.

"We think the price proposed by EDF is insufficient and we will reccommend against shareholders accepting the offer," said Frederic Rozier, a fund manager at Meeschart Gestion Privee, which holds EEN shares.

Shares in both EDF and EEN were suspended before the start of trading on Friday. In a conference call on Friday, EDF said trading in its shares as well as those of EEN would restart on Monday. (Additional reporting by Astrid Wendlandt, Christian Plumb, Juliette Rouillon, and Blaise Robinson in Paris and Jonathan Gleave in Madrid; Editing by Jon Loades-Carter and Tim Hepher) ($1 = 0.6943 euro)

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