State-owned China Three Gorges in US$10.8 billion bid for Portugal’s biggest company EDP

If the deal goes through it will be the latest in a series of acquisitions by Chinese firms in the country since its 2010-13 debt crisis

PUBLISHED : Saturday, 12 May, 2018, 2:59pm
UPDATED : Saturday, 12 May, 2018, 9:25pm

China’s state-owned utility China Three Gorges on Friday launched a bid to take control of Portugal’s biggest company EDP, offering a premium of just below 5 per cent on the power firm’s closing stock price.

The total value of the proposed deal is 9.07 billion (US$10.83 billion), excluding a 23 per cent stake already owned by CTG, the Chinese firm and largest EDP shareholder said in a statement issued late on Friday in Lisbon.

Reports that EDP may be an acquisition target of European foreign companies have been circulating for over a year, during which CTG continued to raise its stake, culminating in the 3.26 a share offer.

CTG said in its preliminary offer announcement that it wanted to reach at least a 50 per cent voting stake plus one share in the company. It also offered 7.33 a share for EDP’s wind power unit, EDP Renovaveis, below its closing price of 7.84.

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EDP had no immediate comment. The online edition of the Expresso newspaper said earlier that EDP was likely to consider the offer hostile.

If the deal succeeds, it would be the latest in a series of acquisitions by Chinese companies in Portugal. They have been actively buying assets, from infrastructure to insurance and banking, since Portugal’s 2010-13 debt crisis.

EDP is an integrated generator, supplier and distributor of electricity, the largest company by assets in Portugal with businesses in Brazil, Spain and the United States.

CTG said it was “fully committed to preserving EDP’s Portuguese identity and autonomy as well as its current Portuguese public listing”.

Prime Minister Antonio Costa told reporters earlier that the Portuguese government had no objections to the bid.

“The government has nothing against it, no reservations,” Costa said, adding though that the government does not have to be consulted. “The Chinese have been good investors, be it in REN, EDP or in other sectors ... The important thing is that shareholders can ponder on the project. Let the market work.”

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The proposed offer may test the European Union’s readiness to give control of major infrastructure firms in member states to China, however. It could also run into problems with US authorities since EDP Renovaveis (EDP Renewables) is a major player in its wind energy market.

Another Chinese state company, CNIC, holds a nearly 5 per cent stake in EDP, while other leading shareholders include US financial services company Capital Group, with 12 per cent, and US private equity firm Blackrock.

EDP’s market capitalisation was nearly 11.4 billion as of Friday. It has a net debt of 13.8 billion.

The company serves almost 10 million power market clients and 1.6 million natural gas customers and runs over 330,000km (205,000 miles) of power transmission lines.

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