Energy giant in £6.8bn deal to take over IP

GDF will pay £6.8bn for the 30 per cent stake in a deal that will increase the French company’s exposure to both the UK and the international power market.

The 418p per share offer comes at a seven per cent premium to an earlier approach by GDF and values International Power at about £22.8bn.

The proposal has been backed by International Power’s independent directors after they rejected an offer of 390p a share earlier this month, which valued the company at £19.9bn.

At the time International Power said the offer was too low.

GDF’s acquisition, which is subject to shareholder approval, comes a year after it took a controlling stake in a new company that combined International Power’s 45 power stations with its own non-European assets, creating the world’s largest independent power producer.

At the time it agreed not to bid for the remaining shares for 18 months, a lock-up which expires in August. GDF Suez can buy out the remaining stake sooner with the agreement of the group’s independent non-executive directors.

The new International Power business has 11 plants in the UK, including joint ownership of the giant coal-fired station at Rugeley in Staffordshire, which powers the equivalent of half a million homes.

It is also a majority owner in the First Hydro hydroelectric plants at Dinorwig and Ffestiniog in North Wales.

International Power bought the 1,200 MW combined cycle cogeneration plant Saltend Power Plant in Hull in 2005.

Saltend was acquired from Calpine Corporation for a total consideration of £500m.

The plant is sited next to BP Chemicals Limited’s petrochemical plant.

Around seven per cent of the plant’s generating capacity and all of the plant’s steam output is contracted to BP Chemicals in sales agreements which expire in 2015.

The balance of the plant’s electricity generation is sold into the UK power market.

International Power has around 11,000 staff, with operations in 30 countries.

GDF said: “The offer enables GDF Suez to take full control of a unique platform for development in fast growing countries, where the group intends to significantly increase its investments in the future.

“International Power has leading positions in regions supported by steady energy demand such as South America, the Middle East, South-East Asia and Australia.”

Following completion of the offer, GDF intends to increase its capital expenditure in fast growing markets.

Analysts said the deal will make good strategic sense for GDF given International Power’s strong growth prospects.

Analyst Angelos Anastasiou at Investec said: We do not see too much regulatory risk. Given that GDF already owns 70 per cent of International Power, we do not think that there will be too much of a problem with regulatory clearances, especially as the original deal went through the merger clearance process.”

International Power said the offer was attractive, given the company’s position in international power generation markets and its growth potential.

GDF, which has an office in Leeds, employs 218,900 people worldwide and generated revenues of £75.5bn in 2011.

Its chairman and chief executive Gerard Mestrallet said the move would allow the group to “fully capture growth in fast growing markets”, including Asia.

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