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Endesa Chief Denounces Hostile Bid By Gas Natural

Posted on: Sunday, 9 October 2005, 03:00 CDT

By Heather Timmons

Rafael Miranda, chief executive of the Spanish energy company Endesa, has said that a $28 billion hostile bid for his company by another Spanish company, Gas Natural, was a value-destroying, politically motivated mistake.

The offer by Gas Natural, made early last month, would bring together the country's largest natural gas company and its top electricity provider, a combination some analysts say is the best way forward for energy companies.

Endesa is mounting a spirited defense. "We agree that integration is a sound idea, but it's important who you integrate with," Miranda said Wednesday in London. Gas Natural's management, he said, had no experience merging companies and had overestimated the advantages it could obtain through a combination with Endesa.

Endesa has told its shareholders that if it remains independent, it will increase dividends and net income 12 percent a year over the next five years, while selling nonstrategic assets and returning the cash to shareholders. Management has also modified its compensation, promising to forgo bonuses for the next five years if the share price drops to 18.56, or $22.20, where it closed on Sept. 2, four days before the Gas Natural offer. Endesa shares fell 41 cents to 22.14, in midday trading Thursday in Madrid. Gas Natural's offer for Endesa, a company about double its size, is stirring controversy in Europe, where European Union regulators are eager to create Continent-spanning energy giants as opposed to companies in individual countries. It has also set off bitter exchanges between the management teams.

In a statement released Wednesday, Gas Natural called Endesa's plans for profit growth unrealistic and said it might take legal action against Endesa for explaining the bid in an "inexact, biased and deliberately confusing way."

Spain's energy regulator and the European Commission, the executive body of the European Union, are in a debate over who should rule on the deal. A decision is expected next week.

Analysts say the commission is more likely to strike down the deal.

Source: International Herald Tribune

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