London-based International Power said Thursday that it had received an indicative proposal of 390 pence per share from Paris-based GDF. The offer represents a slim premium of 1.7% to International Power's closing price Wednesday of 383.4 pence.
"GDF Suez ... confirms that it has made an approach to the independent directors of International Power regarding a possible cash offer of 390 pence," GDF said in a statement in response to International Power's announcement of the offer. "A merger would simplify the GDF Suez group structure and improve further the integration between the businesses."
GDF, led by chief executive Gérard Mestrallet, said that it would either announce its intention to make a firm offer or pull its indicative proposal by the close of the market on April 26. One obstacle to the indicative bid became immediately apparent Thursday as International Power shares leapt 6.5% to 408.3 pence, an almost 5% premium to GDF's proposed offer.
GDF, in which the French state has a veto-wielding 36% stake, agreed in late 2010 to swap assets outside of continental Europe and paid £1.4 billion in cash in October 2010 for its 70% holding in International Power. The French company targeted International Power to expand its operations in emerging markets in Brazil, the Middle East and Asia, and diversify earnings away from Europe's highly regulated energy market.
At the time of that initial acquisition, GDF agreed to an 18-month lockup period during which it would not bid for International Power's remaining shares. That agreement expires Aug. 4.
"The offer makes sense for GDF Suez, which will gain full control over a business that operates as its international arm," said a Paris-based analyst who asked not to be named. "The market is clearly betting that GDF has left some margin in the initial approach to increase its offer."
International Power has interests in more than 100 power plants across the world, with about 28% of its total generating capacity located in North America, 19% in Latin America, 17% in the U.K. and Europe, 17% in the Middle East and Africa and 11% in Asia. About 60% of its plants are fueled by natural gas.
"The proposal is subject to certain preconditions and there can be no certainty that an offer will ultimately be forthcoming or on the terms on which any offer might be made," International Power said in a statement. "Shareholders will be kept informed of relevant developments and in the meantime are advised to take no action."
GDF shares traded Thursday at €19.17 ($25.54), down €0.275, or 1.4%, on their previous close.
International Power is taking advice on the offer from a Morgan Stanley team that includes Simon Smith, Chris Thiele, Laurence Hopkins and Paul Baker, and from Barclays Bank plc's Alisdair Gayne, Richard Taylor, Matthew Ponsonby and Iain Smedley.
GDF did not name its advisers.
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