$40b bid for Spanish power firm

MADRID - Gas Natural, Spain's largest natural gas supplier, offered 22.7 billion ($40 billion) in cash and stock for power producer Endesa, attempting the world's biggest hostile takeover of a utility.

Gas Natural bid 21.45 per share, 12 per cent more than yesterday's price, made up of 0.569 of a new share and 7.34 euros in cash.

The Barcelona-based utility, worth 11 billion on the stock exchange, plans to sell as much as 9 billion of Endesa assets to win antitrust approval. Gas Natural will assume Endesa's debt, equal to 19.8 billion as of June 30.

"If both companies can keep their best assets, the deal would be attractive," said Pedro Real de Asua, who helps manage $1.1 billion at Barclays Fondos in Madrid. "It's clear that there are synergies between both businesses."

Antoni Brufau, Gas Natural's vice-chairman, and other European utility leaders are devising mergers to gain clients before the market opens to more competition in 2007. EON, Europe's largest publicly traded power company, said it may bid for Scottish Power, a UK utility valued at 10 billion ($26 billion).

For more than two years Brufau has sought to build a power and gas company capable of competing with Germany's EON and Electricite de France, utilities that are over twice the size of any Spanish provider.

In 2003, he led the company's unsolicited bid for Iberdrola, Spain's No 2 power company, a plan that was blocked by regulators. Spain's new Government has said it's open to utility industry consolidation.

The combined company would be Europe's sixth-largest utility by revenue, with 32 million clients in 16 countries from Poland to Brazil.

- BLOOMBERG