Gas Natural Suspended as Board Meets on Fenosa Bid

By Paul Tobin

July 30 (Bloomberg) -- Gas Natural SDG SA was suspended from Madrid trading before a board meeting to discuss the purchase of a 45 percent stake in Union Fenosa SA, Spain's third-largest utility, that would trigger a bid for the company.

Gas Natural, the nation's largest gas supplier, will offer 16.8 billion euros ($26.2 billion), or 18.33 euros per Fenosa share, El Mundo reported on is Web site, without identifying who provided the information.

The Barcelona-based gas company previously tried and failed to buy Spain's top two power producers, Endesa SA and Iberdrola SA. By acquiring Fenosa, the third-largest, it would be able to expand in electricity generation and distribution as power producers encroach on its dominance in the domestic gas market.

``Gas Natural in the past has made the mistake of making offers that weren't attractive enough,'' said Francisco Salvador, a director at Venture Finanzas SA. ``What the press is reporting now this time sounds credible.''

Gas Natural scheduled a board meeting today at 4 p.m. local time to discuss purchasing Actividades de Construccion y Servicios SA's stake in Fenosa, it said in a filing. A bid at 18.33 euros per share would be 57 percent higher than Fenosa's closing price on July 16, the day before ACS said it was considering selling its holding.

Union Fenosa's market value is 14.6 billion euros. Today the shares of all three companies were suspended from trading. Officials at ACS and Gas Natural declined to comment on the possible bid price.

Endesa Purchase

The deal would the biggest takeover of a utility since Enel SpA's joint bid with Acciona SA for Endesa last year, which valued the Spanish utility at 45.2 billion euros. The price paid for Endesa was six times the Spanish power producer's earnings before interest, tax, depreciation and amortization in 2007. At 18.33 euros per share, Gas Natural would be paying 7.5 times Fenosa's estimated Ebtida for this year, according to Bloomberg data.

Gas Natural will proceed with a 3.5 billion-euro capital increase to help finance the bid, El Mundo said.

ACS has said it wants to sell its holding in Fenosa to ``consolidate'' its position in Iberdrola, the world's largest owner of wind parks, according to a July 17 filing. ACS held 7.8 percent of Iberdrola in May 2007, and in June this year said it had contracts in place to purchase an additional 5.2 percent.

Prompt Decision

Gas Natural Chief Executive Officer Rafael Villaseca said yesterday that he wanted a prompt decision on Fenosa and that the company was not working on a joint offer.

Gas Natural sells gas in countries including Argentina, Brazil, Colombia, Mexico, Italy and Spain. It also owns a gas distributor in Boston and has power plants at home, in Mexico and in Puerto Rico.

The company's acquisition drive accelerated after it lost about 30 percent of its home market when Spain allowed customers to choose fuel suppliers in 1999.

Gas Natural's 25 billion-euro hostile bid for Iberdrola in 2003 was blocked by the nation's regulator. It abandoned a 23 billion-euro offer for Endesa, made in September 2005, after the bid was topped by Germany's E.ON AG. E.ON's Endesa offer was later beaten by Enel and Spanish partner Acciona.

European utility takeovers gathered pace as national markets opened to full competition last year. Before the Endesa takeover was completed in October 2007, Iberdrola acquired Scottish Power for 14.4 billion pounds ($28.5 billion). Electricite de France SA is now in talks to acquire British Energy Group Plc, three people with knowledge of the discussions said.

Enel, E.ON and other European power producers want to expand in Spain, where growth in energy demand is outpacing the European average. In 2006 energy consumption in Spain increased 3.2 percent, compared with 2.4 percent in the euro region, according to the most recent data published by Eurostat.

To contact the reporter on this story: Paul Tobin in Madrid at ptobin@bloomberg.net