A Possible Takeover of International Power

Morningstar analysts discuss next steps for GDF Suez and International Power

Morningstar 30 March, 2012 | 10:14AM
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GDF Suez (GSZ) announced late this week that it was exploring the possibility of offering GBP 390 per share for the remaining 30% stake of International Power (IPR) that it does not already own. Shares in International Power immediately jumped, rallying by nearly 6% in a day when the overall FTSE declined and hit its lowest level in two months.

Morningstar analysts Mark Barnett and Charles Fishman explore in their latest research note how a bidding process could unfold:

"GDF Suez announced Thursday that it has discussed with the independent directors of International Power a possible cash offer of GBP 390 per share for the remaining 30% of the shares not already held by GDF Suez. Pursuant to the rules of the UK City Code on Takeovers and Mergers, GDF Suez has until April 26 to either announce, after approval by its board, a firm intention to make an offer for International Power or announce that it does not intend to go forward with the offer.

"The nonbinding offer is approximately 8% above our fair value estimate for International Power ... Trading following the announcement pushed shares approximately 4% higher than the GDF Suez offer price, suggesting investors may be expecting a sweetened bid.

"A significantly higher bid could be a value-destroying move for GDF's investors, especially if key power markets remain weak over the medium term. Still, combining the remainder of International Power with its Energy Europe and international business would reduce the complexity of GDF's organizational structure and probably present significant opportunities to drive synergies from the combination."

For International Power's full research report, click here.
For GDF Suez's full research report, click here.

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