July 30, 2008 / 8:52 AM / in 11 years

Gas Natural to buy ACS's 45 percent Fenosa stake

MADRID (Reuters) - Spanish utility Gas Natural GAS.MC has agreed to buy a 45 percent stake in rival Union Fenosa UNF.MC from debt-laden builder ACS (ACS.MC) in a deal worth 7.6 billion euros, the companies said on Wednesday.

The deal comes after months of speculation over consolidation to create a domestic energy champion capable of fending off foreign predators.

It also follows Gas Natural’s failed 2003 attempt to buy Spain’s top electricity company Iberdrola (IBE.MC), and its losing 2005 bid for No. 2 power firm Endesa (ELE.MC), which was eventually bought by Acciona (ANA.MC) and Enel (ENEI.MI).

Industry Minister Miguel Sebastian welcomed the deal.

“I think it is good news, because it creates a Spanish energy champion, which is good for ensuring supply,” Sebastian told journalists.

Spain’s government evoked security of supply when it imposed conditions on foreign bidders for Endesa, a move which has been ruled as illegal by the European Union’s top court.

In confirmation of an earlier Reuters story, ACS said Gas Natural would pay 18.33 euros a share, which values the company at around 16.75 billion euros ($26.1 billion).

Fenosa shares, trading of which was suspended earlier in the day, last changed hands at 15.94 euros each. Shares in ACS and Gas Natural were also suspended from trading.

Gas Natural plans to purchase an initial 9.99 percent within the next five working days. Under Spanish law, energy watchdog CNE must first approve any stake acquisition of over 10 percent in an energy company.

The Barcelona-based gas company would then make a full cash bid for Fenosa to comply with Spanish regulations.

“Acquiring Union Fenosa will allow Gas Natural to bring forward to next fulfilling its 2008-2012 strategic plan and reposition the company as an integrated gas and electricity company,” the company said.


Spanish oil major Repsol (REP.MC), which owns 24.2 percent of Gas Natural, separately said it would provide up to 1.6 billion euros towards the buy.

In another statement, fellow Gas Natural shareholder, Criteria CRIT.MC, the holding company of savings bank La Caixa, said it would provide up to 1.9 billion euros for the purchase.

La Caixa holds 30 percent of Gas Natural, according to stock exchange records.

In addition, Gas Natural said it would launch a capital expansion for 3.5 billion euros and sell non-strategic assets for 3.0 billion to help fund the deal.

It said the purchase would generate synergies of 300 million euros.

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

The agreed share price implies that ACS would receive 7.59 billion euros. That would help cut its debt pile, which stood at 18.4 billion euros at the end of June.

($1=.6416 Euro)

Additional reporting by Teresa Larraz; Writing by Martin Roberts; Editing by Gerald E. McCormick and David Cowell, Gary Hill

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