French power giant GDF Suez is expected to announce it has taken over its UK rival International Power (IP) as early as tomorrow.
The two companies had resumed talks after failing to agree a deal earlier this year, with GDF now believed to be offering a special dividend of £1.3 billion to sweeten the agreement for IP investors.
A deal with GDF would create one of the world’s biggest independent power generators, with estimated sales of €13.5 billion. The enlarged group would keep the name International Power.
IP supplies electricity to four million UK households, and has 20.6GW of net generating capacity in Europe, North America, the Middle East, Asia and Australia. This is about a third that of GDF Suez’s, the world’s 10th-largest power producer with production assets in Europe, Latin America, Asia, the Middle East and North America. Both companies have been recently expanding in the Middle East.
A merger would be good news for IP, which has increasingly found itself struggling to compete with integrated energy groups such as GDF.
GDF, which is 36 per cent owned by the French government, plans to take control of two-thirds of IP, with existing investors keeping the remaining shares. Under the terms of the proposed deal, GDF would integrate its non-European power generation businesses into IP, as well as its UK and Turkey assets, in return for the majority stake.
IP’s current market capitalisation is approximately £5.58 billion. It had net debt of £5.1 billion at the start of the year.
If a deal is not agreed by Tuesday, it could be announced in September.
