Texan power group throws Spanish takeover into chaos

TXU, the US power company, has succeeded in blocking attempts by the Spanish group Union Fenosa to take over its rival Hidroelectrica del Cantabrico ahead of a share holder vote tomorrow that had been due to back the 2.7bn euro deal.

Following a stormy weekend meeting which lasted four hours, the board of Cantabrico, Spain's fourth-biggest electricity company failed to paper over a split, leaving the future of the group uncertain.

The offer had the backing of board members speaking for holders accounting for 24 per cent of the shares. However, the board representative for TXU, which has 10 per cent of the company, abstained, as did Cajastur, a regional savings bank which also has 10 per cent. Cajastur, which is partly owned by the regional government of Asturias, is insisting on local employment safeguards before approving a deal.

The problems will not be unwelcome to TXU, which put Cantabrico into play after its initial bid in March was rejected on what some regard as blatantly nationalist grounds.

TXU owns Eastern Electricity in the UK, and has been looking for ways to build on that European bridgehead to expand on the Continent.

Fenosa, which is Spain's third-biggest power company, needs 75 per cent support in order to overturn company rules limiting voting rights to 10 per cent. This would make it impossible to enforce control.

Fenosa is offering 24 euros a share for Cantabrico, 13 per cent more than TXU.

Spanish investors have been hoping that a British or German utility which could not be blocked from bidding under European rules would enter the fray. However, analysts say that with Fenosa already offering a very generous price, that is unlikely even after the weekend hold-up.

Fenosa, which has a market capitalisation of over 6bn euros, has seen its shares significantly underperform the Madrid stock market index since launching its bid, while Cantabrico has already seen a 72 per cent leap in its share price this year.

The deal already had the approval of Spain's key regulators.

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