GDF Suez SA, the world's largest utility company, agreed Monday to buy 30 percent of International Power PLC for $10 billion, concluding price negotiations for the U.K.-based power company. GDF also boosted its guidance
Paris-based GDF has targeted inroads into Asia and Latin America after facing stagnating rates that do not match cost increases in France, as well as potential nuclear taxes in Belgium. It is building power plants and selling gas from Brazil to South Korea.
GDF completed a merger of assets with International Power last year, combining divisions in Turkey, the U.K. and outside of Europe.
The deal values the U.K. utility company at $36.1 billion, up from an initial offer valuing it at $31.5 billion.
The French power giant revised its capital expenditure guidance over the medium term within fast growing markets to 40 to 50 percent, up from 30 percent. Its earnings per share guidance for the same period was also revised up 9 percent, to 2 euros from 1.8. The deal could increase GDF's net recurring income to as much as $5.5 billion.
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The acquisition of the minority stake in International Power, based on a strict financial discipline, constitutes a major step in the development of the Group, said GDF Suez CEO Gerard Mestrallet in a statement. The transaction is accretive on earnings for shareholders and also establishes the basis of a long term and solid growth. We want GDF Suez to be the leading energy player in the emerging countries.
The deal should be completed by July, pending approval from European regulators and 75 percent of International Power's shareholders. GDF will sell $4 billion in assets to help finance the takeover.
Shareholders in International Power will receive cash of 418 pence per share, a 9 percent premium to Friday's closing price, as well as a final dividend of 6.6 euro cents per share for 2011.
This is definitely a good deal for International Power shareholders, John Musk, an analyst at RBC Capital Markets, told Bloomberg. It's a little harder for GDF shareholders to swallow, though I don't think they've overpaid.
Senior independent director at International Power Sir Neville Simms told the Financial Times shareholders will be encouraged to approve the deal.
It represents a price that fairly reflects the company's position in international power generation markets and its inherent growth potential, he said. Accordingly, the independent IPR directors will be unanimously recommending that IPR shareholders vote in favour of the scheme.
The takeover is the second-largest deal in Europe this year, after Glencore International bid $41 billion for mining company Xstrata.