Fears Over Endesa Bid Gas Natural Deal Could Create Monopoly
Posted on: Thursday, 8 September 2005, 12:01 CDT
Opponents of a hostile bid by the Spanish energy company Gas Natural to acquire the electricity company Endesa said Wednesday that the involvement of Endesa's main competitor in the deal could create a near monopoly in the country's energy markets, raising questions about whether the deal would pass regulatory hurdles.
The competitor, Iberdrola, has struck an agreement with Gas Natural to buy between 7 billion, or $8.9 billion, and 9 billion worth of Endesa's assets if the deal is eventually approved. It was rejected late Tuesday by Endesa's board as insufficient, but could still be revised or submitted directly to shareholders. With Endesa and Iberdrola together controlling about 80 percent of Spain's electricity market, some critics say the deal could lead to higher prices. "The resulting company would consolidate an already dominant position," Union Fenosa, a Spanish electricity and gas company, said in a statement. "It would also limit competition between gas and electricity, with damaging consequences for consumers." Some analysts speculated that the agreement with Iberdrola could hurt the bid's chances of gaining approval from Spain's regulatory agencies.
"The additional Gas Natural agreement to sell some of Endesa's assets to its main competitor, Iberdrola, seems designed to soften the main competitor's complaints and facilitate governmental and regulatory approval," said a report by Goldman Sachs quoted by Reuters. "However, we believe such agreement will create an oligopoly." Gas Natural's 22.6 billion bid for Endesa, announced on Monday, would create the largest gas and electricity company in Spain and Latin America, and one of the largest in Europe. Endesa's board said the sum fell short of the company's true value. Gas Natural has shown no signs of altering its bid. Company executives say they will soon submit their offer to Spain's regulatory agencies for approval, a process that is expected to take about six months.
Source: International Herald Tribune
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