After months of wrangling, UK-based International Power has finally agreed the terms of a merger/ takeover deal with French group GDF Suez - and shareholders will probably be delighted. As part of the deal, which will see the French own 70% of the combined company, they'll share a hefty dividend pot worth 92p-a-share, or £1.4bn in total. That's a powerful incentive to cut a deal - even if does mean another big (and important) UK infrastructure company passing into the majority ownership of a foreign national champion...
International Power won't be a name familiar to everyone, but it is (well, was) a very substantial UK business: it operates 45 power stations in 21 countries, including six here in the UK, with revenues of over £3.5bn last year. Still, that makes it a minnow compared to French giant GDF Suez, whose revenues were about 20 times as much last year. So on the face of it, the fact that its shareholders get to own 30% of the combined group - which will be called New International Power, imaginatively - represents a pretty good deal. The UK group also seems to have done well in management terms: CEO Philip Cox will run the combined group, while it will also get a number of representatives on the board.
Shareholders still need to sign the deal off, but that looks like a formality. The rationale is the same as it always is: becoming one of the world's biggest energy producers means a better credit rating, economies of scale and enhanced growth prospects. The two companies reckon they can strip out £165m a year in costs (most of it by the end of next year) while boosting their capacity to win new deals in high-growth regions like Asia and Latin America. And if shareholders don't buy that, we suspect it quite likely that they'll come up with 1.4bn reasons to sign up to the deal anyway.
Although New International Power will remain listed in London, there's no doubt that its centre of gravity has now shifted across La Manche - especially since the French government owns a third of GDF. And that will inevitably cause some disquiet. With British Energy already in French hands, the UK now has just two independent energy producers - Centrica and Scottish & Southern. Even if you're comfortable with the principle that our assets should be for sale to the highest bidder, perhaps different rules should apply where energy security is concerned. Put it this way: if the deal had been the other way round, would the French have allowed it?
In today's bulletin:
Slowdown in big ticket sales points to more economic gloom
Shareholders buzzing as International Power seals French connection
Is IPO plan just pie in the Skype?
Business travel is back, says InterContinental
FSA workers jump before Osborne pushes them