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Exclusive-French nationalisation of EDF set to cost more than 8 billion euros
Global Banking & Finance Review®
Company
By Mathieu Rosemain and Pamela Barbaglia
PARIS (Reuters) -The French government is poised to pay more than 8 billion euros ($8.05 billion) to bring power giant EDF back under full state control, two sources with knowledge of the matter said, adding the aim is to complete the deal in the fourth quarter.
One of the sources said the cost of buying the 16% stake the state does not already own could be as high as almost 10 billion euros, when accounting for outstanding convertible bonds and a premium to current market prices. EDF and the economy ministry declined to comment.
The French government, which already has 84% of EDF, announced last week it would nationalise the company, which would give it more control over a revamp of the debt-laden group while contending with a European energy crisis.
The sources said the state would likely launch a public offer on the market at a premium to the stock price because the other option – a nationalisation law to be pushed through parliament – would take too long.
When Prime Minister Elisabeth Borne announced the nationalisation plan on July 6, the stake held by minority shareholders was worth around 5 billion euros.
In addition, the French government would also have to buy 2.4 billion euros of convertible bonds and offer a premium to current stock market prices to entice minority shareholders, with the cost of the transaction going well beyond 8 billion euros, the sources said.
They did not give details of the size of the premium, with one of them saying no final decision had been taken.
TIMELINE
France wants the buyout to take place in October or November, and for that to happen it would have to move quickly, the sources said, asking not to be named because the matter is confidential.
The next step will be for the government to announce the offer price and make an official filing, the sources said. Then EDF will need to give its opinion while an independent expert will be drafted in to review the offer price.
All this will take some time, given the holiday season lull.
France may have to announce the terms of the offer over the coming weeks, before the holiday period in August, to ensure it can have a deal in the fourth quarter, one of the sources said.
French Economy Minister Bruno Le Maire said at the weekend: “It won’t be an operation that will be fulfilled in days and weeks, it will take months. I will provide all the necessary precisions in the coming weeks, but not now.”
The government last week increased the amount of money available for financial operations related to its state shareholding portfolio by 12.7 billion euros in the second half of the year, with officials saying this would cover the EDF deal and other, unspecified transactions.
Goldman Sachs and Societe Generale are working with the government to secure a deal, sources had previously said, while EDF is being advised by Lazard and BNP Paribas.
($1 = 0.9921 euros)
(Reporting by Mathieu Rosemain and Pamela Barbaglia, additional reporting by Leigh Thomas and Michel Rose, writing by Silvia Aloisi, editing by Barbara Lewis)
Convertible bonds are a type of debt security that can be converted into a predetermined number of the company's equity shares. They offer investors the potential for capital appreciation while providing fixed income.
A public offer is a method of raising capital by offering shares to the general public, typically through a stock exchange. It allows companies to attract a wide range of investors.
In finance, a premium refers to the amount by which the price of a financial instrument exceeds its face value or intrinsic value. It often reflects the additional cost investors are willing to pay for certain benefits.
A stake in a company refers to the ownership interest held by an individual or entity, typically represented by shares. It indicates the percentage of the company that the stakeholder owns.
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