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Market awaits Gas Natural move in battle for Endesa

2 March 2006 – Spanish energy firm Gas Natural announced profits up 17 per cent to €749m ($891m) Wednesday but market interest remained fixed on its bid buy Endesa, the Spanish electricity giant which is subject to a counter bid from E.ON.

Germany utility E.ON’s €29bn offer last week trumped Gas Natural’s cash and shares &euro23bn bid. Interest in Endesa has led to a rise in its share price and a revaluation of the company at around €29.5bn.

Gas Natural is refusing comment on whether it is prepared to raise its bid but even if the Spanish government block the foreign takeover bankers believe that Gas Natural will be obliged to raise its bid in order not to disadvantage Endesa shareholders. Bankers in Madrid believe Gas Natural could raise up to €16bn in debt and a further €14bn by way of issuing new shares but this would dilute the interests of existing shareholders.

According to stockmarket rules, Endesa has only one more opportunity to revise its bid and is not permitted to bring in partners to raise its offer. E.ON similarly can only raise its bid once more should Gas Natural match or better the current deal on offer.

Gas Natural has already said it has buyers for some of the assets of the combined group that it does not want and may be able to secure further buyers in a bid to enhance its offer.