Court removes legal obstacles to Endesa bid

The 16-month battle for control of Endesa, the Spanish electricity group, moved a step closer to resolution Tuesday when a Madrid court removed the final legal obstacle to the presentation of bids.

Judges ruled that an injunction against Gas Natural, the gas supplier, be lifted, effectively unblocking a €21bn ($27bn) cash-and-share offer to Endesa shareholders presented in September 2005 and approved by stock market regulators in February last year.

Only days before its approval, the Gas Natural bid was trumped by Eon of Germany, which proposed an all-cash bid valuing Spain’s largest generator at €29bn before the distribution of a special dividend linked to asset sales. Tuesday’s ruling, which follows the lifting of a separate injunction against the Spanish government’s approval of Gas Natural’s takeover plan, means all bids can proceed.

Wulf Bernotat, chief executive of Eon, on Tuesday welcomed the ruling.

“[The] decision by the Madrid-based Court marks an important breakthrough. All legal hurdles in the takeover process have now been cleared. Endesa's shareholders will soon be able to decide on our offer. That is why we remain confident of taking the transaction to a successful conclusion.”

Eon’s formal offer, which the Spanish government tried to block, is currently worth €27bn, although the German group has promised to increase this to about €37bn when final bids are tabled in a sealed envelope.

Eon’s latest proposal was announced in September in response to stake-building by Acciona, the Spanish construction and energy group, which is seeking to amass slightly less than 25 per cent of Endesa.

Analysts have discounted a winning counter-offer from Gas Natural. However, the Eon bid is contingent on a change in Endesa’s statutes, which currently limit voting rights to 10 per cent, regardless of the amount of equity held.

Endesa is expected to call shareholders to vote on the changes at extraordinary meeting within the next month. However, executives have cautioned there is no guarantee of garnering the necessary support.

Even if the statutes are changed, Acciona may attempt to spoil Eon’s tender offer by gathering a hard core of Spanish shareholders, including other investors from the construction and property sectors, to force the German group to improve its bid or to share power with them.

The position of Caja Madrid, a savings bank that holds nearly 10 per cent of Endesa, is not clear.

Acciona is one of three Spanish construction and services groups that have built substantial positions in the country’s electricity and energy sectors in recent months. Each has rehearsed the government’s argument for strong national energy champions to compete against large European groups such as Eon and RWE of Germany and France’s EdF.

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