EDF ready to unveil bid to take over of British Energy
Friday, 25 July 2008
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British Energy could finally be sold as soon as next week with executives from the French power giant EDF keen to tie up their takeover before the holiday season begins.
EDF executives have stepped up negotiations with the nuclear energy company in recent days, following several months of talks, and now hope to be able to announce a deal imminently. British Energy issued a statement to the Stock Exchange, saying it was in "advanced discussions" regarding a takeover of the company, though its spokesman declined to elaborate.
Centrica, the British power company, is also involved in last-minute negotiations with EDF, seeking to secure a deal that would see it buy 25 per cent of British Energy. But it is not yet clear whether agreement on this deal will be reached in time for it to be announced alongside an EDF takeover.
EDF has been one of the leading contenders to buy British Energy since the British Government effectively put it up for sale by announcing it wanted to sell its 35 per cent stake in the nuclear operator, which produces a sixth of the UK's electricity.
The French company was the only formal bidder for British Energy during an auction process that concluded in May, but had its offer – understood to have been pitched at 685p a share – rejected as materially undervaluing the company. It is now thought that EDF subsequently told British Energy it could offer as much as 710p a share, but the nuclear company's board and the Government has been holding out for a higher price.
Shares in British Energy rose by more than 6 per cent to 728.5p yesterday, as investors concluded that EDF has been persuaded to increase its offer. However, the French company declined to comment on its intentions.
The final takeover price for British Energy is still under discussion, but could go above 750p, valuing it at between £11bn and £12bn. That would net the Government as much as £4bn, though this cash is already earmarked for the decommission costs associated with dismantling nuclear power stations that are coming towards the end of their lives.
Centrica also refused to comment on its involvement in the deal, though it is understood that its executives are also working feverishly with EDF. Centrica is keen on taking a stake in the company as part of a diversification strategy that would add nuclear power expertise to its portfolio, reducing its exposure to volatile wholesale energy markets.
The British company's involvement in the deal would also appease critics of the sale of the UK's only major nuclear operator to a French company. Malcolm Wicks, the Energy minister, has said that while the Government is not opposed to British Energy being taken over by a foreign buyer, he is alert to the sensitivities of the issue, particularly now that Gordon Brown has committed the UK to developing a new generation of nuclear power plants.
The Government will also have to decide on how a deal with EDF would affect other potential operators of nuclear power plants to be built in the future, given that British Energy's existing sites are likely to be the favoured locations for the new constructions.
