Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

The barbarians are tooling up, so it can't be long before a group of private equity firms club together for a $20 billion leveraged buyout.

But a bid for Endesa SA looks like a deal too far.

Blackstone, CVC, and KKR have mulled an offer for the Spanish utility, El Confidencial reported on Wednesday. Italian energy giant Enel SpA, which owns 70 percent of Endesa, scotched the report, branding it "old groundless speculation."

Money Trail
Firms have raised record amounts for private equity funds
Source: Bloomberg
Note: excludes the $20.8 billion UBS Trumbull Property Fund (a real estate fund)

Despite the denial, Endesa would be a logical target for private equity. It would be big, with an enterprise value of 26.5 billion euros ($28 billion) before any premium, and so require a group of firms to muster the equity necessary.

Hit Parade
Energy Future Holdings remains the world biggest leveraged buyout
Source: Bloomberg

But Endesa's net debt is low at just 1.3 times Ebitda. Lifting that to, say, four times would raise nearly 10 billion euros, cutting the amount of cash needed for a purchase. Asset sales could help cut the equity ticket too.

Demand for energy in Spain is expected to rise and there are probably costs to take out. Little wonder private equity, sovereign and infrastructure funds are already involved in the country's industry.

As for the exit route, a return to public markets through an IPO, or a sale to a consortium of pension and infrastructure funds, would be logical.

There's a snag. It's hard to see why Enel would want to sell for anything other than a stupid price.

Follow The Leader
Enel is under no pressure to change its strategy given its share price performance
Source: Bloomberg

It doesn't need the cash. Leverage is already under control, and coming down. Worse, Enel would be much diminished without Endesa -- it would be a mostly Italian business with some small assets in Latin America and a splattering of renewable assets. The Spanish company contributed about 20 percent of Ebitda in 2015.

The only justification for a sale would be to fund acquisitions outside Europe -- aping the strategy of Spanish peer Iberdrola SA. RWE AG and E.ON SE, both grappling with domestic challenges, might be tempted by offers for their U.K. subsidiaries. Or Enel could plant a flag in the U.S. Still, Brexit, tougher British regulation and the steep valuations U.S. utilities are attracting make a switch to the U.K. or North America look a bad trade.

Then there's Rome to worry about. It could do with the money given the parlous state of the public finances. A sale of Enel's stake for 20 percent more than the current market price would raise 18 billion euros -- money that could be returned to investors. Italy would get about 4.3 billion euros via its 24 percent stake. Nice to have, but a drop in a 2.2 trillion-euro ocean.

Most costly would be the loss of national pride that would come with a major Italian company shrinking at a time of anxiety about Italy SpA being sold to foreigners.

Size may be no object in LBOs nowadays as firms raise record funds for takeovers. But that doesn't mean everything is up for grabs.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Chris Hughes in London at

To contact the editor responsible for this story:
Edward Evans at