Zapatero to Allow Gas Natural Bid for Endesa

By Richard Orange

SPAINS President Jose Luis Zapatero will give the green light to Gas Naturals E21bn ($26bn, Pounds 17bn) bid for Endesa this week. His decision will ignore the fierce objections of the countrys own competition tribunal, the misgivings of Europes competition body and UK companies Centrica and Royal Dutch/Shell.

The decision will open the way to a battle for the support of Endesas shareholders, which is bound to see Gas Natural forced to increase its bid. The government is expected make its decision on Friday morning, the last weekly cabinet meeting ahead of the official deadline.

Zapatero is expected to force Gas Natural to scrap the sweetheart deal it signed with Endesas main rival power company Iberdrola, to pre-sell some E9bn of assets. Instead, it is expected to ask the company to sell assets to a wider pool of Gas Naturals competitors, and increase the number of power stations and gas contracts it passes on. The government is also expected to demand that the combined body dispose of its stake in Spains gas and power transmission networks.

At the meeting Economy Minister Pedro Solbes is expected to push for the tough conditions to counter accusations that the government has supported Gas Naturals bid from the outset. Industry Minister Jose Montilla, who has roots in Barcelona where Gas Natural is based, will push for more lenient treatment to guarantee the company can up its bid to levels likely to win over Gas Natural shareholders.

Fridays decision is expected to prompt Gas Natural to launch a higher bid within days. Endesas share price is more than E2 a share above Gas Naturals offer. Endesas main shareholder Caja Madrid, which holds 9%, said last week that Gas Natural would have to raise its offer if the bank was to approve the bid.