GDF and UK’s International Power close to merge

Britain's power generating company International Power is reportedly close to finalising a transaction to merge with French energy giant GDF Suez, a deal that would create one of the world's biggest power groups.

The board of International Power is to meet today to recommend GDF's offer that would include the French group paying a special dividend of £1.3 billion ($2.1 billion) for the UK company's shareholders, reported the Financial Times yesterday.

The two power companies have been working on a merger since the past seven months and renewed discussion last month after talks broke down in January 2010. (See: GDF Suez and UK's International Power renew merger talks) 

Both groups have come to an understanding for a 400-pence-a-share proposal, valuing the deal at £11.2 billion. Earlier International Power showed a lukewarm response as there was no cash component to the offer that would make its approximately 360,000 shareholders agree to the deal.

Under the present proposed deal, GDF would bring in its power stations outside of Europe into International Power and in return, GDF will own about two-thirds of the new company, while the rest will be left to float in the London Stock Exchange.

To sweeten the deal for International Power shareholders, GDF has agreed to the £1.3-billion special dividend.