Gaz de France and Suez yesterday agreed to create the world's third-largest listed power and gas company after France's president Nicolas Sarkozy stepped in to prevent the 18-month old deal from collapsing.
The politically charged "merger of equals", delayed by disputes over valuation and control, will be on the basis of 21 Gaz de France shares for 22 Suez shares and involves the partial spin-off of Suez's water and waste-management activities.
The groups unveiled the agreement after talks to solve a financial impasse over an earlier deal brokered by a previous conservative government to prevent a foreign takeover of Suez.
Their boards adopted new merger terms on Sunday after President Sarkozy put pressure on Suez to abandon most of its historic water and waste assets and focus on electricity and gas.
Suez chairman Gerard Mestrallet put a brave face on the decision to float 65 per cent of the environment business despite his earlier public insistence that it was central to Suez's business activities.
At a presentation on the deal, he praised President Sarkozy's "industrial vision", which analysts called the latest example of a hands-on industrial policy by France's newly elected leader.
After the environment spin-off, the new group is valued at about €78 billion and will vie with France's EDF and Germany's E.ON amid European deregulation.
After long delays caused by political disputes, the deal is expected to be completed in the first half of 2008.
The merger implies the privatisation of Gaz de France, a move strongly opposed by unions and opposition Socialists, with the French state due to hold "more than 35 per cent" in GDF Suez, compared with its current GDF stake of around 80 per cent.
But it also raises concerns among investors over the role to be carried out by the French state, which will have a third of the seats on the GDF-Suez board and a blocking minority stake. - ( Reuters )
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