ENEL Consolidates Control Over HidroAysén/ENDESA

Enel agrees €11bn deal for Endesa control

Originally published in the Financial Times

Enel, the Italian energy group, late on Friday night agreed the €11.1bn ($13.9bn) purchase of a controlling 25 per cent stake in Endesa, marking the final stage in the three-and-a-half-year battle for the Spanish electricity generator.

The long-expected deal sees Acciona, the Spanish construction and energy group, shed its 25 per cent stake in Endesa less than two years after signing a management agreement with Enel to jointly control Endesa.

The sale effectively pre-empts by a year the execution of a put option on the stake agreed between Acciona and Enel in March 2007, when the two joined forces to drive Eon of Germany out of a hotly contested bid battle for Endesa.

The Italian group will pay €11.1bn in cash, including an €1.5bn dividend related mainly to the sale of the Endesa assets in a side deal with Eon.

As part of the transaction, Acciona has also agreed to buy €2.9bn in Endesa assets, mainly wind farms and hydroelectric plants. The deal is priced at the same terms envisaged under the original put agreement, representing a 75 per cent premium to the current market price.

Endesa’s shares, which are highly illiquid, were up 1.6 per cent, at €24.43, when trading was suspended on Friday. Eon’s €42bn bid for Endesa was bitterly opposed by the Spanish government, whose blocking tactics fell foul of European Commission antitrust rules.

The state had backed a much earlier bid by Gas Natural, the Spanish gas group, to create a national energy champion. When this failed, it gave its blessing to the power-sharing venture between Acciona and Enel, lauding it as a ”Spanish solution” to what threatened to become a foreign takeover of Endesa.

But the relationship between Acciona and Enel soured with the Italian group’s institutional management style clashing with the more feudal approach of family-controlled Acciona.

The purchase agreed on Friday will give Enel a 92 per cent in Endesa, allowing it for the first time to consolidate all of the company’s earnings. Under the previous arrangement, it could not do this because it lacked management control.

At the same time, the highly leveraged Acciona is keen to liquidate its Endesa holding to pay down debt and develop its renewable energy business. Enel said on Friday it had secured an €8bn syndicated loan with 12 banks, including Santander of Spain and Mediobanca of Italy. An initial tranche of €5.5bn will fall due in 2014, with the rest to be repaid by 2016. Fulvio Conti, chief executive of Enel, said the deal would “strengthen the company’s position as a global operator in the energy sector”.

Copyright The Financial Times Limited 2009