Gaz de France and Suez today cleared the way to create the world's third-largest electricity and gas company after their boards approved the revised terms of a merger.
The "merger of equals", first drawn up 18 months ago but 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 spin-off of Suez's water and waste-management activities.
Excluding the environment business, the new GDF Suez is valued at around €78 billion ($107 billion).
The groups announced their agreement after a weekend of talks to solve a financial impasse threatening to torpedo the deal.
French President Nicolas Sarkozy had put pressure on Suez to abandon the majority of its historic water and waste-management assets and focus on electricity and gas.
Under the terms of the deal, Suez will divest 65 per cent of its environment activities - valued by analysts at €18 billion to €20 billion - through a stock market listing, which will take place at the same time as the merger.
The spin-off of the water business was necessary to slim down Suez and preserve a politically acceptable merger of equals with the smaller GDF, sources said.
GDF and Suez saw their shares shed about 0.1 per cent each to €36.70 and €41.75 respectively by 7.20am.
Formation of GDF Suez will be completed as early as possible in 2008, the companies said.