Endesa board recommends rejection of Gas Natural bid

8 March 2006 – The board of Spain’s largest electricity company Endesa yesterday said it had unanimously rejected a hostile bid from Gas Natural and has recommended its shareholders to refuse it.

The statement said that the €21.3 ($25.3) per share cash and stock bid by Gas Natural was “inadequate from a financial standpoint, for Endesa shareholders.” It went on to say that the offer was substantially less than Endesa is worth and that, “current projects by Endesa will generate, in the short and long term, greater value for shareholders than the offer by Gas Natural.”

Gas Natural had formally submitted its bid for Endesa on Monday triggering a 45-day shareholders’ acceptance period. Shareholders are widely expected to reject the offer after Germany’s E.ON made a counter bid with a €27.50 per share all-cash offer. E.ON has yet to officially table its counter bid.

Endesa’s largest single shareholder, Spanish savings bank Caja Madrid, which recently raised its stake to nearly ten per cent, also rejected Gas Natural offer and said it won’t sell its holding to the gas company.

Despite the E.ON bid representing a 30 per cent premium over the offer from Gas Natural, there is still uncertainty whether the bid will suceed. Endesa has indictaed that it still regards the offer as undervaluing the company and both Spanish and EU regulatory authorities will need to be persuaded that the combination of the largest and tenth largest European utilites makes sense for the market.