E.ON ups Endesa offer to €37bn after EC move

E.ON raised its offer for the Spanish energy group Endesa to €37bn (£25bn) last night, just hours after the European Commission ordered Madrid to dismantle a series of measures designed to block the bid from the German utility.

The €35-a-share offer from E.ON represents a 37 per cent improvement on its initial €25.5 bid for Spain's biggest electricity company, tabled in February. It follows a surprise swoop on Endesa by the Spanish construction company Acciona, which picked up a 10 per cent stake earlier this week, paying €32 a share.

Acciona also said it might raise its stake further to 24.9 per cent, just below the level at which it would be required to make a full offer.

E.ON's chief executive, Wulf Bernotat, said the new offer was "an exceptionally attractive opportunity for Endesa's shareholders and reflects our long-term confidence in Endesa's business model and growth prospects".

Endesa is seen as a test case of economic protectionism in Europe's energy market because the Spanish government had given strong backing to a rival bid for Endesa from the Barcelona-based Gas Natural, worth about €20.87bn.

A successful takeover by E.ON would probably create the largest power and gas utility in the world, with more than 50 million customers in over 30 countries.

Though Acciona insisted yesterday that it was acting alone, many believe the timing of its acquisition late on Monday - the eve of a legal ruling against Madrid - was more than a coincidence. "Maybe the Spanish government has just got smart," said one well-placed observer yesterday, suggesting a more subtle strategy to keep Endesa in Spanish hands is emerging.

The good news for E.ON yesterday was a decision by the European Commission that Spain acted illegally in imposing a series of onerous conditions on the German company to wave through the purchase of Endesa.

The Commission said the authorities in Madrid did not have the competence to impose the terms on E.ON because that power lies in Brussels. It also said in a statement that Spain's power regulator, the National Energy Commission, broke EU rules on the free movement of capital.

The Spanish regulator's 19 conditions would have led to Endesa having to sell off its nuclear and coal generation business.

The Commission's ruling, which strikes down 18 of the conditions, is legally binding.