France's government has offered to spend 9.7 billion euros ($9.85 billion) to buy out EDF, giving it complete control of Europe's largest nuclear power operator as it deals with a continent-wide energy crisis.
In a statement issued on Tuesday, the finance ministry stated that the government will offer EDF's minority owners 12 euros per share, a 53 percent premium over the closing price on July 5, the day before the government declared its plan to fully nationalise the debt-laden firm.
By 0836 GMT, EDF shares had risen 15% to 11.80 euros after resuming trading on Tuesday after a one-week halt pending details of the government acquisition plan.
The state already owns 84 per cent of EDF, which has been plagued by unanticipated outages at its nuclear fleet, delays and cost overruns in building new reactors, and government-imposed power pricing restrictions to protect households from skyrocketing electricity bills.
The conflict in Ukraine has exacerbated the group's dilemma, requiring it to buy electricity on the market at historically high prices and sell it to competitors at lower prices.
France has stated that nationalising EDF will strengthen the security of its energy reserves as Europe seeks alternatives to Russian gas imports.
Rising energy prices have put pressure on European energy suppliers, and Germany moved earlier this month to bail out Uniper, the country's largest importer of Russian gas.
France, which should be exporting power at this time of year, is currently importing from Spain, Switzerland, Germany, and the United Kingdom, and the supply shortage is expected to grow this winter.
"Nationalisation is ultimately the only way to save the company and ensure electricity production," said Ingo Speich, head of sustainability and corporate governance at Deka Investment, which has a small stake in EDF. "This is a bitter but necessary step."
With S&P forecasting EDF's debt to reach close to 100 billion euros this year, a bondholder in the group said the potential takeover was a welcome signal of government backing.
However, the bondholder noted that much more needs to be done to stabilise the balance sheet.
According to a banker familiar with the situation, the state, which funded the majority of a 3 billion euro capital increase for EDF in the spring, will most likely have to infuse more money shortly.
EDF was floated on the Paris stock exchange in 2005 for 33 euros per share, so investors who purchased the stock at the time would have suffered a significant loss.
Nonetheless, observers emphasised that the government would only need to get 90 per cent ownership of EDF in order to delist it.
"We think the offer looks attractive and has high probability of success," Citi analyst Piotr Dzieciolowski said in a note.
By early September, the buyout bid will be filed with the stock exchange regulator. According to a finance ministry source, the French government hopes to complete the delisting procedure by the end of October.
According to Reuters, the government would pay close to 10 billion euros to acquire the remaining 16 per cent of EDF, after deducting outstanding bonds and a premium for minority owners.
(Source:www.financialpost.com)
In a statement issued on Tuesday, the finance ministry stated that the government will offer EDF's minority owners 12 euros per share, a 53 percent premium over the closing price on July 5, the day before the government declared its plan to fully nationalise the debt-laden firm.
By 0836 GMT, EDF shares had risen 15% to 11.80 euros after resuming trading on Tuesday after a one-week halt pending details of the government acquisition plan.
The state already owns 84 per cent of EDF, which has been plagued by unanticipated outages at its nuclear fleet, delays and cost overruns in building new reactors, and government-imposed power pricing restrictions to protect households from skyrocketing electricity bills.
The conflict in Ukraine has exacerbated the group's dilemma, requiring it to buy electricity on the market at historically high prices and sell it to competitors at lower prices.
France has stated that nationalising EDF will strengthen the security of its energy reserves as Europe seeks alternatives to Russian gas imports.
Rising energy prices have put pressure on European energy suppliers, and Germany moved earlier this month to bail out Uniper, the country's largest importer of Russian gas.
France, which should be exporting power at this time of year, is currently importing from Spain, Switzerland, Germany, and the United Kingdom, and the supply shortage is expected to grow this winter.
"Nationalisation is ultimately the only way to save the company and ensure electricity production," said Ingo Speich, head of sustainability and corporate governance at Deka Investment, which has a small stake in EDF. "This is a bitter but necessary step."
With S&P forecasting EDF's debt to reach close to 100 billion euros this year, a bondholder in the group said the potential takeover was a welcome signal of government backing.
However, the bondholder noted that much more needs to be done to stabilise the balance sheet.
According to a banker familiar with the situation, the state, which funded the majority of a 3 billion euro capital increase for EDF in the spring, will most likely have to infuse more money shortly.
EDF was floated on the Paris stock exchange in 2005 for 33 euros per share, so investors who purchased the stock at the time would have suffered a significant loss.
Nonetheless, observers emphasised that the government would only need to get 90 per cent ownership of EDF in order to delist it.
"We think the offer looks attractive and has high probability of success," Citi analyst Piotr Dzieciolowski said in a note.
By early September, the buyout bid will be filed with the stock exchange regulator. According to a finance ministry source, the French government hopes to complete the delisting procedure by the end of October.
According to Reuters, the government would pay close to 10 billion euros to acquire the remaining 16 per cent of EDF, after deducting outstanding bonds and a premium for minority owners.
(Source:www.financialpost.com)