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Endesa Bid Under Attack

Posted on: Friday, 9 September 2005, 15:00 CDT

Opponents to the Spanish company Gas Natural's hostile bid for the electricity company Endesa have said that the involvement of Endesa's main competitor in the deal could create a near monopoly in Spanish energy markets, raising questions about whether regulators would approve the deal.

The competitor, Iberdrola, has struck an agreement with Gas Natural to buy 7 billion, or $8.9 billion, to 9 billion worth of Endesa's assets if the deal is eventually approved. Endesa's board on Tuesday rejected Gas Natural's offer as insufficient, but it could still be revised or submitted directly to shareholders. With Endesa and Iberdrola together controlling about 80 percent of the Spanish 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 energy company, said. "It would also limit competition between gas and electricity, with damaging consequences for consumers." Some analysts said the Iberdrola accord could hurt the bid's chances of gaining approval by Spanish regulators.

"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 would create the largest natural gas and electricity company in Spain and Latin America.

Source: International Herald Tribune

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