Suez-Gaz Deal Hanging in the Balance

Another round of uncertainty shrouds the proposed merger of Suez, the French utility, with the state-controlled outfit Gaz de France. This time round, it is the rumor of a bid by Francois Pinault, the billionaire from France, to take over Suez. While rumors have been rife about a bid being in the offing, the spokesman of Pinault’s organization, the Artemis holding company, said it is yet to decide on the issue. The spokesman stated they would be keeping all avenues open as long as possible.

Suez has been consistently saying that as far as it is concerned, there is no plan to make a sale, and that there was no plan to sell any of its activities. It got strong support from its merger partner, GDF, who issued a statement denying involvement in any project with Pinault.

This is not the first time the proposed deal has been hanging in the balance. Earlier too, the same deal failed to materialize when a court decided that the deal could not go ahead without the total liberalization of the energy markets of the European Union after France’s presidential election.

Splitting Suez can be one surefire way of throwing a spanner in the works, by forestalling its merger with GDF. The merger itself was brokered by the government of France, when Enel, an Italian utility, mentioned of its willingness to buy Suez. However, the break-up would enable Suez to remain in French control.

This latest development has seen the analyst community split down the middle. There is one section that actually believes that Pinault’s bid made a lot of sense, while the other section were of the opinion that the government itself could not let the Pinault deal be honored for fear of falling flat on its face in case the merger did not come through.

On the flip side, Suez shares rose by 3.2 percent to 40.50 euros, finally plateauing off at 39.77 at 5:20 a.m. ET. Besides, there has been speculation in the French media that if Pinault were to be bid successfully, he would, after acquiring it, split it into two entities – selling the environmental unit to Veolia Environment and all the energy assets to GDF.