EU belts Spanish efforts to block takeover by German firm

20 December 2006

Neelie Kroes, competition commissioner of the European Competition Commission, has ordered Spain to drop its latest conditions in the way of the €37-billion ($49 billion / Rs217,597 crore) takeover bid for Spanish power utility Endesa by Germany's E.ON.

Kroes warned the Spanish government saying that it had 15 days to remove the conditions, which she described as unjustified, or face legal action under EU laws.

Endesa is Spain's largest electricity producer. The Spanish government prefers Endesa's merger with another Spanish firm, Gas Natural, which had made a lower, €22-billion bid for Endesa in September 2005. Endesa had expressed strong objections to this bid.

In February this year German power firm E.ON announced a €29.1 billion bid for the power utility. Though the Spanish government initially said it was neutral to the German power firm's bid, it imposed 19 conditions, including those on the sale of Endesa's power plants.

The dispute moved before the EU Competition Commission, which ruled in August this year that Spain had broken EU merger rules in its handling of the takeover, forcing the Spanish government to backtrack on the previous conditions, but coming up with new ones.

Spain's current demands would force E.ON to retain Endesa's brand for five years, prevent it from selling Endesa's assets outside Spain and keep the acquired company's power plants running on Spanish coal.