If you can't beat 'em

4 Aug 2008 By John Foley Follow @johnsfoley

The owner of British Gas might covet a merger with the UK s main nuclear power operator. But it can t pay cash and a paper bid isn’t likely to succeed. The trouble is, a backseat role in EDF s rebuffed approach to British Energy doesn t offer a solution to Centrica s problems.

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Centrica, the UK energy firm, is in talks with EDF, the French group, over a joint bid for British Energy, according to people familiar with the situation. Centrica would take 25% of British Energy, which operates seven nuclear power plants.

The UK government has a call on 35% of British Energy's shares. A further 22% is in the hands of two funds, Invesco and M&G. They are thought to have rejected EDF's initial proposal to offer 765p per share, in cash and an equitylike derivative, for British Energy last week.

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