Feb. 20 (Bloomberg) -- Endesa SA, Spain’s largest hydropower producer, was suspended from trading before a board meeting as Italy’s Enel SpA considered paying 11.1 billion euros ($14 billion) in cash and assets to gain full control of the company.

Enel’s board met on Feb. 17 to discuss an offer for a 25 percent stake in Endesa held by builder Acciona SA, a move that would boost Enel’s holding to 92 percent, according to a person familiar with the matter. Endesa’s board will meet today at 5 p.m. Madrid time. Trading in Acciona also halted.

A deal would require Enel, which became Europe’s most indebted utility when it bought Endesa with Acciona, to increase borrowing. The Rome-based company was saddled with 55.8 billion euros of debt after the takeover in 2007. Having cut that to 51 billion euros by Sept. 30, Enel may now see the level return to almost 60 billion euros.

“This is an agreement which favors all three players,” Antonio Lopez Silvestre, a Madrid-based utilities analyst at Fortis Bank SA, said today. It’s a “good transaction” for Enel, considering the size of Endesa, “but not so good in terms of value,” he said. Acciona’s stake would be worth 6.4 billion euros at Endesa’s current market value, according to data compiled by Bloomberg.

Renewable Assets

For Acciona, which said Feb. 4 it would rein in spending unless it sold the stake, the transaction would help fund a 6.77 billion-euro, three-year investment plan. An accord may also give the company control over Endesa wind farms, making it the world’s second-largest wind operator after fellow Spaniard Iberdrola Renovables SA.

“They are getting financing at a time when financing is hard to find,” said Fortis’s Lopez. “They are also getting the renewable assets they wanted.”

Acciona will receive 3 billion euros of Endesa’s renewable energy assets and 8 billion euros in cash in the agreement, newspaper El Pais reported today. A spokeswoman for Acciona didn’t respond to a voicemail message seeking comment.

The Madrid-based company may gain 2,989 megawatts of renewables assets, of which 2,054 megawatts are in wind energy, according to a company presentation to Bloomberg last week.

An agreement between Enel and Acciona would see them break up their joint venture a year early. Under the original takeover terms, Acciona had an option to sell its interest at a price of 43 euros a share plus interest minus dividends from March 2010.

Year Early

“Enel always wanted to get Endesa, but wasn’t allowed to do so without Acciona’s help,” Lopez said. “It will now get it a year before planned.”

Enel dropped 3 percent to 4.25 euros in Milan trading, while the benchmark S&P/MIB Index fell 5.9 percent. Endesa halted trading at 24.21 euros in Madrid and Acciona stopped at 83.85 euros.

Enel’s annual earnings before interest, tax, depreciation and amortization will rise by 2 billion euros to 16 billion euros, a person familiar with the matter said this week, speaking on condition of anonymity.

“I’m not worried about the debt at all,” said Emanuele Vizzini, a Milan-based analyst who helps manage about $1 billion at Investitori SGR, including Enel shares. “The rise in Ebitda will be strong enough to make debt sustainable. It’s a price you have to pay to be among the biggest.”

Bank Finance

Enel will agree on a loan of about 8 billion euros as soon as today to finance the acquisition of the Endesa stake, two bankers with knowledge of the deal said.

Banco Bilbao Vizcaya Argentaria SA, Mediobanca SpA and Banco Santander SA are arranging the loans, said the bankers, who declined to be identified before the transaction is completed.

The arrangers are initially syndicating part of the debt to nine other lenders, said the bankers. Intesa San Paolo SpA, Royal Bank of Scotland Group Plc, La Caixa, Natixis, Calyon, UniCredit SpA, Caja Madrid, BNP Paribas SA and Bank of Tokyo-Mitsubishi are among the lenders joining the deal, one of the bankers said.

Enel is rated A- by Standard & Poor’s, its fourth-lowest investment-grade ranking, and one step higher at A2 by Moody’s Investors Service.

Acciona is not the only Spanish builder seeking asset sales to reduce debt and fund investment. Sacyr Vallehermoso SA, the country’s fifth-biggest construction company, agreed in December to sell highway operator Itinere Infraestructuras SA to a Citigroup Inc. fund in a transaction valued at 7.9 billion euros to cut borrowing.

To contact the reporters on this story: Gianluca Baratti in Madrid at gbaratti@bloomberg.net; Adam L. Freeman in Rome at afreeman5@bloomberg.net

Last Updated: February 20, 2009 12:56 EST