International Power owners set for £1.4bn pay-out

Shareholders in International Power are set to receive a 92p-per-share special dividend following the announcement of a takeover by France’s GDF Suez that would create one of the world’s biggest independent power generators.

The deal – which has been structured to maintain International Power’s status as a separate, UK-listed company – would create annualised pre-tax cost savings of £165m ($104m) at International Power and €70m ($92.2m) at GDF Suez, the two companies said on Tuesday.

If the agreement gets approval from the UK group’s shareholders and regulators, the partly state-owned GDF Suez would inject its non-European power generation businesses into International Power, as well as assets in the UK and Turkey.

In return, it would gain a 70 per cent stake in the enlarged group, which would be still be called International Power. International Power shareholders would retain the other 30 per cent of the business. The special dividend would total £1.4bn.

The enlarged company – to be headed by Philip Cox, International Power’s chief ­executive – would be significantly stronger financially. International Power and GDF Suez said they expected it to be accorded an investment grade credit rating.

Currently, International Power does not have an investment grade rating. Rectifying that situation would cut the cost of its debt, as well as help it fund expansion plans.

Mark Williamson, International Power’s chief financial officer, would remain chief financial officer of the new entity. Dirk Beeuwsaert, vice-president in charge of GDF’s international arm, would become chairman.

Mr Cox on Tuesday said it was too early to say how many jobs might be lost in order to achieve the desired savings. “There will be a certain degree of overlap of corporate and regional office functions,” he said.

International Power also announced first-half results on Tuesday. It made a pre-tax profit of £285m, down from £574m in the first half of 2009.

However, on an underlying basis that stripped out exceptional items and swings in the fair value of financial instruments, profit was £333m.

An interim dividend of 4.39p has been proposed, an increase of 3 per cent on the 2009 first-half payment.

GDF also reported profits for the first half of 2010. Net profit for the first six months of the year rose 9.3 per cent to €3.6bn, with a cold winter in Europe and higher profits from infrastructure projects off-setting the divergence between oil and gas prices. Sales rose by 0.3 per cent to €42.3bn. The French group confirmed its targets for 2010 and 2011.

International Power shares fell 1.4 per cent to 374.8p in early morning trading on Tuesday, while shares in GDF Suez rose 1.6 per cent to €27.23.

Nomura, JPMorgan Cazenove and Morgan Stanley advised International Power on the GDF Suez deal. Goldman Sachs, NM Rothschild, BNP Paribas, Ondra Partners and Blackstone advised GDF Suez.