July 31, 2008 / 4:55 PM / 11 years ago

UPDATE 1-Gas Natural sees Fenosa deal closing in 2009

(Adds company comments, details)

By Carlos Ruano

MADRID, July 31 (Reuters) - Spanish utility Gas Natural GAS.MC said on Thursday it hoped to complete a 16.8 billion euro ($26.18 billion) takeover of Union Fenosa UNF.MC within eight months and turn a profit from the deal after a year.

The offer, at a 30 percent premium to Fenosa’s average stock price in the last 12 months, is the latest shakeup in the energy sector following a takeover of Endesa last year and would create a Spanish champion capable of fending off foreign predators.

Barcelona-based Gas Natural said the deal would form a company with combined 2012 earnings before interest, taxes, depreciation and amortisation (EBITDA) of 6 billion euros.

Within the next five working days, Gas Natural will buy a 9.9 percent stake in Union Fenosa from debt-laden Spanish builder ACS (ACS.MC), marking the first stage of the deal and the most it can buy without regulatory approval.

The gas company hopes to get the green light in February to buy a further 35.3 percent stake from ACS and minority holdings.

“At that point we’ll launch a takeover bid which will probably close during April,” Gas Natural Chief Executive Rafael Villaseca said during a conference call with analysts.

Gas Natural had already agreed to buy ACS’s 45.3 percent stake in Union Fenosa for 18.33 euros per share, a 50 percent premium the price a couple of weeks before ACS announced plans to sell its stake.

Union Fenosa was the top gainer on Spain's blue-chip Ibex .IBEX share index and closed up 8.4 percent at 17.28 euros.

ACS stock meanwhile rose 4.38 percent to close at 31.71 euros after the firm said it would make a 1.9 billion euro capital gain on selling its Union Fenosa stake. [ID:nL1496644]

Gas Natural fell 5.1 percent to 31.33 euros.

“It’s been a good move for ACS as Gas Natural has really paid through the roof for Fenosa in its third and, eventually successful, attempt to create a domestic energy champion,” a Spanish analyst said.


Villaseca said the deal would boost earnings per share.

“From the first year it will be 15 percent above what we had in our previous plan and, with that, we will maintain our dividend,” he said.

The deal follows an unsuccessful 2003 bid by Gas Natural for Spain’s top electricity company Iberdrola (IBE.MC) and a failed 2005 bid for No. 2 power firm Endesa (ELE.MC), which was eventually bought by Acciona (ANA.MC) and Enel (ENEI.MI).

The merger will accelerate the company’s organic growth, allowing it to scale back on capital investment, achieve cost synergies of 300 million euros and tax savings of 500 million.

Total capex for the combined company will be 8-9 billion euros in 2008-2012, well below the 12.5 billion Gas Natural forecast for itself prior to announcing the merger.

Gas Natural did not expect to have to divest any major assets for regulatory reasons.

The companies’ combined debt will reach 26 billion euros after the purchase but is set to decline rapidly as major shareholders provide a capital increase and Gas Natural sells around 3 billion euros worth of assets.

Villaseca saw debt falling to 15-16 billion euros in 2012.

As part of possible sales, he expected to closely study a gas deal between Fenosa and Italy’s ENI (ENI.MI).

To comply with antitrust regulations, Gas Natural will likely have to sell Fenosa’s gas business to Fenosa partner ENI and sell Fenosa’s renewable energy assets to another Fenosa partner, Enel, analysts have said.

Reporting by Carlos Ruano and Judy MacInnes; Writing by Andrew Hay; Editing by Erica Billingham

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