---- by Andrew Newby ----
LISBON (AFX) - The tug-of-war between the Portuguese government and Italy's ENI SpA for control of Portuguese oil company Galp Energia took a new twist when cork products tycoon Americo Amorim agreed deals to buy 32.5 pct of Galp for more than 1.6 bln eur.
EDP - Energias de Portugal SA said it has agreed to sell its 14.27 pct in Galp to the Amorim group for 720.5 mln eur, valuing Galp at 5.050 bln eur, two and a half times its 2 bln eur implied worth in April last year.
EDP shares surged to a four-year high after the news, also helping to push the PSI-20 blue chip index to a four-year peak.
Amorim has also reached an accord with Rede Electrica Nacional, state-controlled owner of the national grid, to take an option to buy the company's 18.3 pct in Galp for 923 mln eur, Jose Penedos, REN chairman, told Lusa newsagency.
The government, with 30 pct of Galp, and ENI, with 33.34 pct, have been at loggerheads over the unlisted company's future since a deal for ENI to give up its stake collapsed last December when the European Commission vetoed the sale of 51 pct of Galp unit Gas de Portugal to EDP and the other 49 pct to ENI.
Under the collapsed deal, arranged in April last year, ENI was to sell its 33.34 pct in Galp for 667 mln eur and pay 400 mln for the GdP shareholding.
Paolo Scaroni, ENI CEO, said last month that his company intends to retain its entire stake and may increase it to help turn Galp into "a leader in the Iberian market".
The government has threatened to take legal action if ENI seeks to take control and has set a year-end deadline for agreement in talks with the Italian giant.
EDP Participacoes, the EDP unit through which the Galp shares are owned, will book an after tax capital gain of about 398 mln eur, the power company said in a statement to CMVM, the Lisbon stock market regulator.
The profit was bigger than analysts' expectations of 200-300 mln eur.
At the same time, EDP Participacoes has made an agreement with REN for call and put options on REN's stake in Galp. The Amorim group will replace EDP as a party to that agreement once the purchase of EDP's stake in Galp has been completed, it added.
EDP said its board decided to sell the Galp stake in the absence of a strong strategic rationale for keeping it.
This follows the commission's veto of EDP's proposed purchase of 51 pct in GdP and the government's new strategy, unveiled in October, to support the existence of more than one integrated player in the gas and electricity businesses in Portugal, the company said.
Other shareholders in Galp are state-holding company Parpublica with 4.23 pct, Iberdrola SA with 4 pct and gas supply companies Portgas and Setgas with 0.044 pct each.
The Amorim group, whose main division is Corticeira Amorim, the world's largest maker of cork products, has been reported to be in talks to buy Iberdrola's stake in Galp but Parpublica has reportedly rejected an offer from Amorim.
ENI claims the right to increase its ownership of Galp because of the Portuguese government's failure to implement the terms of the 2000 agreement through which ENI bought the stake, notably its failure to float Galp on the stock market.
Reports last month said the government is preparing an initial public offering of 10 pct in Galp at the end of May next year.
The aim of the move is to prevent ENI being able to exercise a second buy option to raise its holding in Galp to 47 pct, Jornal de Negocios said. ENI has an initial option to increase its stake to 43 pct, according to previous reports.
Francisco Murteira Nabo, Galp chairman, said in October that the government is likely to sell 25-30 pct in the first half of next year.
At 1.45 pm, EDP stock was up 0.03 eur at 2.57 eur on turnover of 17.1 mln shares as the PSI index rose 34.93 points or 0.42 pct to 8,261.78.
Espirito Santo Research said EDP's gain on the sale in comparison with the stake's book value adds 7 euro cents per share or 3 pct to the broker's 2.74 eur price target, Cristina Vieira da Fonseca of Espirito Santo said in a note to clients.
"The sale should also mean around 50 pct more on our earnings expectation for 2006 of 760 mln eur. We expect EDP to use the cash-in to continue investing in renewable energies" and to reduce debt, the analyst said, reiterating a 'Buy' rating.
Enrique Soldevila Manrique and Laura Alonso of BPI said EDP has similar hidden value in its 30 pct stake in REN, which they value at 295 mln eur. BPI kept an 'Accumulate' opinion.
Dresdner Kleinwort Wasserstein raised its target price on EDP to 2.65 eur from 2.45, based on the gain from the Galp stake sale and because of the release today by ERSE, Portugal's electricity regulator, of detailed pricing proposals for 2006-2008.
Seven euro cents of the increased target are "attributable to the higher price achieved in the Galp sale and the rest is due to the improved regulatory clarity and the slightly better parameters announced by the regulator," DrKW analysts said in a note to clients, keeping an 'Add' ranking.
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The copying, republication or redistribution of AFX News content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
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LISBON (AFX) - The tug-of-war between the Portuguese government and Italy's ENI SpA for control of Portuguese oil company Galp Energia took a new twist when cork products tycoon Americo Amorim agreed deals to buy 32.5 pct of Galp for more than 1.6 bln eur.
EDP - Energias de Portugal SA said it has agreed to sell its 14.27 pct in Galp to the Amorim group for 720.5 mln eur, valuing Galp at 5.050 bln eur, two and a half times its 2 bln eur implied worth in April last year.
EDP shares surged to a four-year high after the news, also helping to push the PSI-20 blue chip index to a four-year peak.
Amorim has also reached an accord with Rede Electrica Nacional, state-controlled owner of the national grid, to take an option to buy the company's 18.3 pct in Galp for 923 mln eur, Jose Penedos, REN chairman, told Lusa newsagency.
The government, with 30 pct of Galp, and ENI, with 33.34 pct, have been at loggerheads over the unlisted company's future since a deal for ENI to give up its stake collapsed last December when the European Commission vetoed the sale of 51 pct of Galp unit Gas de Portugal to EDP and the other 49 pct to ENI.
Under the collapsed deal, arranged in April last year, ENI was to sell its 33.34 pct in Galp for 667 mln eur and pay 400 mln for the GdP shareholding.
Paolo Scaroni, ENI CEO, said last month that his company intends to retain its entire stake and may increase it to help turn Galp into "a leader in the Iberian market".
The government has threatened to take legal action if ENI seeks to take control and has set a year-end deadline for agreement in talks with the Italian giant.
EDP Participacoes, the EDP unit through which the Galp shares are owned, will book an after tax capital gain of about 398 mln eur, the power company said in a statement to CMVM, the Lisbon stock market regulator.
The profit was bigger than analysts' expectations of 200-300 mln eur.
At the same time, EDP Participacoes has made an agreement with REN for call and put options on REN's stake in Galp. The Amorim group will replace EDP as a party to that agreement once the purchase of EDP's stake in Galp has been completed, it added.
EDP said its board decided to sell the Galp stake in the absence of a strong strategic rationale for keeping it.
This follows the commission's veto of EDP's proposed purchase of 51 pct in GdP and the government's new strategy, unveiled in October, to support the existence of more than one integrated player in the gas and electricity businesses in Portugal, the company said.
Other shareholders in Galp are state-holding company Parpublica with 4.23 pct, Iberdrola SA with 4 pct and gas supply companies Portgas and Setgas with 0.044 pct each.
The Amorim group, whose main division is Corticeira Amorim, the world's largest maker of cork products, has been reported to be in talks to buy Iberdrola's stake in Galp but Parpublica has reportedly rejected an offer from Amorim.
ENI claims the right to increase its ownership of Galp because of the Portuguese government's failure to implement the terms of the 2000 agreement through which ENI bought the stake, notably its failure to float Galp on the stock market.
Reports last month said the government is preparing an initial public offering of 10 pct in Galp at the end of May next year.
The aim of the move is to prevent ENI being able to exercise a second buy option to raise its holding in Galp to 47 pct, Jornal de Negocios said. ENI has an initial option to increase its stake to 43 pct, according to previous reports.
Francisco Murteira Nabo, Galp chairman, said in October that the government is likely to sell 25-30 pct in the first half of next year.
At 1.45 pm, EDP stock was up 0.03 eur at 2.57 eur on turnover of 17.1 mln shares as the PSI index rose 34.93 points or 0.42 pct to 8,261.78.
Espirito Santo Research said EDP's gain on the sale in comparison with the stake's book value adds 7 euro cents per share or 3 pct to the broker's 2.74 eur price target, Cristina Vieira da Fonseca of Espirito Santo said in a note to clients.
"The sale should also mean around 50 pct more on our earnings expectation for 2006 of 760 mln eur. We expect EDP to use the cash-in to continue investing in renewable energies" and to reduce debt, the analyst said, reiterating a 'Buy' rating.
Enrique Soldevila Manrique and Laura Alonso of BPI said EDP has similar hidden value in its 30 pct stake in REN, which they value at 295 mln eur. BPI kept an 'Accumulate' opinion.
Dresdner Kleinwort Wasserstein raised its target price on EDP to 2.65 eur from 2.45, based on the gain from the Galp stake sale and because of the release today by ERSE, Portugal's electricity regulator, of detailed pricing proposals for 2006-2008.
Seven euro cents of the increased target are "attributable to the higher price achieved in the Galp sale and the rest is due to the improved regulatory clarity and the slightly better parameters announced by the regulator," DrKW analysts said in a note to clients, keeping an 'Add' ranking.
equitynext@afxnews.com
COPYRIGHT
Copyright AFX News Limited 2005. All rights reserved.
The copying, republication or redistribution of AFX News content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
AFX News and the AFX Financial News logo are registered trademarks of AFX News Limited
For more information and to contact AFX: www.afxnews.com and www.afxpress.com
© 2005 AFX News
