EDF Agrees to Sell Entire Stake in EnBW for $6.2 Billion to German State
Electricite de France SA, Europe’s biggest power generator, agreed to sell its stake in German utility EnBW Energie Baden-Wuerttemberg AG for 4.7 billion euros ($6.2 billion) to cut debt.
The state of Baden-Wurttemberg offered 41.50 euros a share, representing a 19 percent premium on its last closing price, the Paris-based company said in a statement today.
The French state-controlled utility has announced in the past four months the sale of its U.K. grid and a deal to take control of a joint venture to develop atomic reactors in the U.S. It also has a minority stake in Edison SpA, Italy’s second- largest power producer.
“EDF has a stable outlook at all ratings agencies but its credit ratings are stretched,” said Christian Kleindienst, an analyst at Unicredit SpA in Munich. The utility is now “concentrating” on Edison and the Italian market, he said.
EDF owns a 45 percent stake in EnBW while OEW, the other major shareholder made up of local authorities, won’t sell its stake to the German land or exercise a put option against EDF for part of its holding, the French utility said. EnBW, which has nuclear, hydroelectric and thermal power plants, said the German state plans to place the shares back in the capital market.
EDF had already reached its target for asset sales with the U.K. grid deal, Chief Financial Officer Thomas Piquemal said in September. That agreement lowered EDF’s debt by 6.8 billion euros. The German deal will allow EDF to reduce debt by about 7 billion euros, resulting in “increased financial flexibility,” according to EDF’s statement today.
“EDF appears to want to focus on fewer countries,” Myriam Cohen, a financial analyst at Alphavalue SAS in Paris, said by telephone. “Energy is a very capex demanding industry. They have to invest huge amounts.”
The deal price is at a multiple of around six times EnBW’s 2011 estimated earnings before interest, taxes, depreciation and amortization, EDF said.
EnBW rose as much as 18 percent and was trading at 41.03 euros as of 2:30 p.m. in Frankfurt. EDF increased 0.8 percent to 31.86 euros in Paris.
A planned renegotiation of a EnBW shareholders’ agreement “would have taken place against a complex and uncertain economic environment,” EDF said. It didn’t offer any other explanations in the statement for the decision to sell the stake.
OEW “has decided not to sell its subordinated shares to the land and not to exercise its preemption rights” on EDF’s stake, according to EDF.
OEW had a put option against EDF for the portion of its 45 percent stake subject to a July 2000 shareholders’ agreement. That accord meant OEW could sell a 25 percent stake to EDF at any time through the end of 2011 at a price of 37.14 euros, according to EDF’s 2009 annual report. This resulted in a 2.3 billion off-balance commitment last year.