IP is confident of improving its credit rating to “investment grade”, at least BBB–, meaning it will be able to borrow at cheaper rates.
The lowered funding charges are part of £165m of synergies IP is hoping to squeeze from its reverse takeover by French government-backed GDF. GDF, which is aiming for €70m (£58m) of synergies, will roll its non-European power generation units into the British company, along with UK and Turkish assets.
Subject to shareholder and regulatory approval, GDF will own just over two thirds of the post-transaction group while IP investors will hold the remainder. IP chief executive Philip Cox will remain in position, as will chief financial officer Mark Williamson. GDF international vice president Dirk Beeuwsaert will come in as chairman, with incumbent Sir Neville Simms becoming his deputy.
Cox was keen to stress the growth prospects available by tapping GDF’s more robust balance sheet. “Very important in this capital-intensive industry is the enhanced financial position of the group,” he said.
One analyst remarked: “It does make it easier for them. They were scratching their heads a bit as to how to take it forward before this.”
The transaction also means investment bankers and lawyers acting for the two firms will enjoy a rare August windfall. Sources who worked on the deal said the advisers would rake in up to £50m in fees from the work.
Shares in IP dropped two per cent to 372.6p as investors registered disappointment at the size of their 30 per cent stake in the merged company.
The news came as IP said its first-half pre-tax profit fell by half to £385m. Stripping out exceptional items it came to £333m.
INTERNATIONAL POWER and GDF Suez hired a raft of investment bankers to push the merger through.
GDF’s efforts were coordinated by a Goldman?Sachs team led by Yoël Zaoui, Nick Harper, Robin Rousseau and Charles-Eduard van Rossum. Zaoui is a graduate of Stanford Business School in the US and has worked on Crédit?Agricole’s acquisition of Banque Indosuez, Elf Aquitaine’s defence against a $59bn (£37bn) hostile offer from Total Fina and Mittal Steel’s merger with Arcelor.
Also working for GDF were Grégoire Chertok of NM Rothschild, BNP Paribas’ Thierry Varene, Ondra Partners’ Michael Tory and Blackstone’s famous rainmaker John “Studs” Studzinski.
Japanese bank Nomura led the charge for International?Power, with William Vereker, Adrian Mee and Jason Hutchings leading the team.
In addition, International Power called on the services of JPMorgan’s Ed Byers, Mark Breuer and Dwayne Lysaght, and Simon Smith and Alastair Cochran of Morgan Stanley.