Uncertainty about the revised terms of the planned merger of Gaz de France and Suez and worries about a possible interference of the French state in the new power giant nagged the companies' shares again on Tuesday.
GDF shares were 3.1 percent lower at 34.71 euros, while Suez's shed 2.7 percent at 39.29 euros by 4:30 a.m. EDT, a day after the utilities groups announced they had agreed on new terms to complete an 18-month old merger plan.
The European utilities sector was down 0.8 percent.
The stocks had already lost around 3 percent each on Monday as investors booked their profits after shares in both companies rallied about 8 percent last week on hopes a deal was in sight.
But analysts expressed concern over the hand the French state could have in the merged group after a senior aide to President Nicolas Sarkozy said the government would retain the power to give direction to GDF Suez -- in which it will hold nearly 40 percent when including indirect holdings.
The stocks were pretty strong last week, so that is one reason behind the fall now, but there are other factors like fears of interference of the French state, KBC Securities analyst Koen Dierckx said. Some investors are afraid the role of the state (in the new group) may be a bit too strong.
There have been relatively strong declarations from the French authorities... Gaz de France, whether you like it or not, has been privatized and they (French authorities) maybe have to make strong declarations to make up for that, Dierckx added.
Suez Chief Executive Gerard Mestrallet, who is set to become chairman of the new GDF Suez group, on Tuesday sought to dispel fears his group would effectively lose its independence.
The chairman of the group will be Gerard Mestrallet who will be under the supervision of his board, in which the state will be present with a third of the seats, Mestrallet told French radio Europe 1.
Pressed to say who would be in command, he said: It's me.
Asked then who would take decisions, he replied: The board will take decisions on the proposals of the chairman. But of course on strategic decisions, there's a need to be perfectly in agreement with all the shareholders, especially the state.
Energy issues are so strategic that no state can loose interest in it.
The end of speculation over a takeover bid for Suez, which had been rife in past weeks amid doubts an agreement could be found to salvage the merger plan, also weighed on Suez shares.
There were some investors who thought the deal would not happen and those were speculating on Suez. Since the merger is going to happen, speculation is deflating and this is hitting both stocks, said an analyst who asked not to be named.
This analyst also cited uncertainty over the valuation of the water and waste management business that Suez agreed to spin off as part of the revised terms of its merger with GDF.
The environment business, which is set to be listed on the stock market at the same time the merger is finalized, has been valued at around 18 billion euros by analysts.
But Mestrallet declined on Tuesday to confirm this estimate.
(Additional reporting by William Emmanuel)