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EDP jumps 12 percent after surprise China bid for Portugal utility

Reuters  |  LISBON/PARIS 

By Axel and De Clercq

LISBON/PARIS (Reuters) - Shares in Portuguese utility jumped as much as 12 percent early on Monday, topping a bid price offered on Friday by Three Gorges (CTG), indicating that the market believes there could be a counter bid or a higher offer from the Chinese state-owned utility.

shares rose as high as 3.49 euros, above 3.26 euros per share bid, which offered a premium of less than 5 percent on the firm's Friday closing price.

That values the proposed deal at 9.07 billion euros ($10.83 billion), excluding the 23 percent stake CTG already owns.

Analysts say the bid is relatively low compared to other recent Chinese bids for European energy assets, where Chinese bidders have offered top dollar to outbid European utilities and infrastructure investment funds.

"In our opinion the offer price is too low to be successful," state-owned Portuguese said in a note.

Portuguese told reporters on Friday his government had no objections to the bid, but major funds which hold stakes so far have made no comment.

management has also not commented.

CTG and another Chinese state company, CNIC, together hold 28.25 percent of EDP shares. With full control of EDP and its renewables unit EDPR , CTG would become one of the top European renewables players, with a large presence in the and Brazilian markets.

But other shareholders may balk at low bid.

"This rise in the shares implies that the offer is very low, which is one of its handicaps," said Paulo Rosa, a at in Porto, adding that "we can't rule out a competing bid".

Last year reported that Spain's had approached EDP about a possible merger, which was subsequently ruled out by the two companies.

Institutional investors hold major stakes in EDP, including with 12 percent, Masaveu Herrero with 7.19 percent, with 5 percent, Mudabala Investment with 4.06 percent and Capital World with 2.69 percent, ThomsonReuters data showed.

The and Investment Management, two major sovereign wealth funds, also each hold more than two percent.

While funds may hold out for a higher price, analysts doubt the could do much to block the deal, even if the acquisition of a strategic European raises eyebrows in the industry.

"For to intervene, there would need to be dumping or an abuse of monopoly, and that is simply not the case here," said of

He added that full control of EDP would strengthen China's hand in talks with the EU about exporting

Already dominant in solar panels, is now pushing ahead in wind turbines. Chinese last year sold more turbines worldwide than , although the Danish firm still installed more capacity, according to WindPower Monthly.

French said CTG's move is bound to sharpen tensions over international trade.

"It raises the question of reciprocity. The opposite move would not be possible," he said, adding that for European firms it would be hard even to buy an individual power plant in China, let alone mount a hostile bid for a utility.

With another Chinese state-owned firm, State Grid of China, owning 25 percent of Portugal's REN, is also getting around European unbundling legislation, which forced utilities to sell their grids in a drive to reduce their market dominance.

(Writing by De Clercq, additional reporting by Sergio Goncalves; editing by Jason Neely)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, May 14 2018. 16:28 IST