UK electricity group rejects GDF Suez offer

GDF SUEZ threatened to walk away from its approach to take full control of International Power after the UK electricity group rejected the French utility’s £5.95 billion offer as too low.

The FTSE 100 company yesterday put the ball in GDF’s court when an independent committee rejected the French group’s bid to snap up the remaining 30 per cent of International Power that it does not own.

International Power said the 390p a share approach “undervalues International Power and, accordingly, GDF Suez has been notified that the independent committee is unable to accept the indicative proposal”.

But GDF, which last year became the world’s largest power utility on all measures after buying 70 per cent of International Power, responded immediately by threatening to walk away from any possible deal.

“GDF Suez will continue to consider its different options regarding International Power, including the possibility to withdraw its proposed offer,” it said. “Any decision by the group will be based on a strict disciplined and value-driven approach to earnings, indebtedness and returns.”

According to several people close to the talks, investors in IP are holding out for an increase from GDF of at least 15p a share.

That follows the sale by Neil Woodford at Invesco, a long-standing shareholder in International Power, of roughly one-third of his holding at about 405p a share.

Some people working on the International Power side have said that GDF could be forced to pitch its offer even higher, with some going as high as 420p a share.

However, one large investor in International Power said 405p was “a very fair price” for the stake. An offer at that price would value the stake at £6.2 billion, while a deal at 420p would lift it to £6.4 billion.

GDF took control of International Power last year in a deal that saw it take a 70 per cent stake in exchange for injecting its non-European assets into the UK-listed company.

International Power shares have been performing better than GDF’s of late, up by one-third over the past year, as investors have bet on a full buy-out. – (Copyright The Financial Times Limited 2012)