Energy secretary Ed Miliband’s department indicated last night it would wave through a merger, which would see the French operator gain a strong foothold in the UK by taking over International Power’s six plants.
A spokesperson said: “It’s a competitive market in the UK, and it’s a competitive market globally.” Lord Mandelson’s business department, which has made protectionist noises over Cadbury, declined to comment.
The French government, which holds a 36 per cent majority stake in GDF, is at an advanced stage of studying the proposal. GDF has appointed Rothschild, BNP Paribas and Goldman Sachs to work on an offer. International Power has taken advice from Nomura.
International Power’s shares closed on a 15-month high at 320p on Friday in anticipation of an announcement. However, sources say bureaucratic delays mean a decision from the French government could still be some time away.
Analysts said a cash-and-shares offer from GDF – which has a market cap of €64bn (£57bn) and debt of around €28bn – was unlikely to find favour with the French government as its holding would be diluted. A cash offer would be pitched at a minimum of £4 per share. In either case, GDF would assume International Power’s debt of £5.4bn. Exane BNP Paribas analyst Benjamin Leyre said the French government would have to stump up at least €500m (£441m) for a cash offer to keep GDF’s net debt to earnings below 2.5 times.