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Gas Natural drops Endesa bid

2 February 2007 – The Spanish utility Gas Natural said on Thursday that it will withdraw its takeover bid for Endesa, clearing the way for Germany’s Eon to proceed with a rival offer for Spain’s largest utility.

Gas Natural’s board of directors made the announcement in a one-sentence filing with the Spanish stock market regulator. It gave no reason for the decision.

Gas Natural started the bidding battle for Endesa in September 2005, with a cash-and-shares offer that values the company, at current market prices, at around €24bn ($31.25 bn). Eon launched its first counterbid in February 2006, and later raised its offer to €36.5bn for the entire company.

Earlier this month, Gas Natural deputy Chairman Antonio Brufau said that, given the situation, “it will be complicated for Gas Natural … to convince the board” to raise its bid to levels close to that of Eon’s offer. Spain’s stock market regulator has said that any revised offers must be filed on Friday, and the whole bidding process should be completed by early March.

With Gas Natural out of the picture, Eon now has to convince Endesa shareholders to tender their shares. Many market observers expect Eon to raise its offer one more time, largely to avoid any attempts to block the deal by Endesa’s top shareholder, Acciona.

Acciona, a Madrid-based construction and renewable energy conglomerate, has previously opposed Eon’s bid. Eon has claimed that Acciona has tried to form a bloc of Spanish shareholders to avoid the takeover.