Gas Natural Bid for Endesa Faces New Hurdles

By Renwick McLean

A Spanish court ruled Tuesday that Gas Natural’s hostile bid to acquire Endesa should be suspended, saying it may have involved illegal collusion with another Spanish utility. The decision casts yet more doubt over the deal, which is opposed by Endesa, Spain’s largest electric utility, but is supported by the Spanish government as it seeks to build a national energy giant and fend off a foreign bidder for Endesa, the German utility E.ON. E.ON’s cause got a lift on Tuesday when the European Union’s internal market commissioner, Charlie McCreevy, said he was leaning toward starting legal action against Spain for its handling of the bids, Reuters reported from Brussels. McCreevy said a decision would come soon on whether to recommend that the European Commission move against Spain for giving its energy regulators additional powers to block a foreign takeover bid. In Madrid, meanwhile, a judge at the Spanish commercial court, Miriam Iglesias Garcia, said that before announcing its bid for Endesa, Gas Natural may have struck an agreement to sell some assets of the combined company to Iberdrola, Spain’s second-largest electric utility. She said that could violate EU rules against actions that impede competition in the single European market. For the ruling to take effect, Endesa must make a deposit of 1 billion to cover any possible financial damages that result from the suspension, the judge said. An Endesa executive, who requested anonymity because she is not authorized to comment publicly about the case, said that the company’s board had yet to decide if it would put up the deposit.

“The board is planning to meet in the coming days to discuss how to proceed,” she said.

“The pressure from Spanish and European courts is increasing” against Gas Natural’s plans, Javier Angulo, the head of equity sales in Spain for Banco BPI, told Bloomberg News.

On Sept. 5, the same day it announced its bid of 22.6 billion, or $27.5 billion, for Endesa, Gas Natural announced that it would sell Iberdrola between 7 billion and 9 billion worth of assets to raise cash and to avoid antitrust concerns.

As part of its defense against the bid, Endesa filed a complaint with the commercial court charging that the two deals were linked and that an agreement to sell the assets had been reached in advance.

In her ruling, Iglesias agreed that the charges had merit and said that the bid should be suspended until she finished fully evaluating Endesa’s complaint. Given the size, cost and complexity of the bid for Endesa, she wrote, it appears unlikely that Gas Natural would have submitted it “without having previously planned for and ensured the full collaboration of Iberdrola.”

Gas Natural and Iberdrola have argued that Endesa’s complaint should be rejected, contending among other things that the EU regulations that were allegedly violated were relevant only if the activities in question affected several EU member states, not just Spain. But the judge rejected that argument. “It seems reasonable to maintain that any act with certain relevance to the market of any state, affects the single and protected ‘common market,’” she wrote. Gas Natural has five days to appeal the judge’s decision to suspend its bid.