Dangerous animal

21 February 2006 By Robert Cyran Follow @rob_cyran

The German utility has no obvious synergies with the Spanish group. And it is paying a punchy price. E.on has long traded at a discount due to fears it was storing up cash for a large acquisition. It has done so in spades.

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Germany's E.on has made a E29bn cash offer for Endesa. The offer of E27.50 per share represents an 8% premium to the price of shares in the Spanish utility on February 20. The offer is at a 48% premium to where Endesa shares were trading before it received a bid from Spanish utility Gas Natural on September 3. Endesa would have an enterprise value of E55bn under the bid once net debt, provisions and minorities are counted.

E.on has net cash of E3.4bn and a market capitalisation of E64bn. It said it could raise up to E6.4bn in a rights issue to finance the bid. The group has said its dividend policy would be unchanged by the offer. If the bid is successful, the resulting utility would be the largest utility in the world. E.on hopes to complete the transaction in mid2006.

HSBC is advising E.on.

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