British Energy finally taken over by EDF

EDF’s takeover of British Energy (BE) comes two months later than expected after 11th-hour opposition from two of its major investors derailed an earlier deal. If approved by the regulator, the sale will see EDF take control of BE's eight nuclear power stations. It will also play a key role in the development of new plants, most probably on the company's existing sites.

Invesco and M&G blocked the move on price grounds when the French power giant EDF was within touching distance of a £12 billion deal before institutional shareholders.

The firms claimed the 765p offer undervalued BE at a time when the value of energy assets was rising. But the higher 774p price now on offer has seen them swing behind the deal - which puts the UK's nuclear destiny in the hands of a firm majority-owned by the French Government.

BE, which is UK's biggest producer of nuclear power - responsible for one-sixth of the nation's electricity needs - had to be rescued by the Government in 2002, but is now seen as a pivotal player in developing a new fleet of nuclear reactors.

EDF's offer is more than 100 times the £90 million value of the company in October 2004, when the group's shares were delisted under a financial overhaul which all but wiped out former investors.

The creation of BE, which has around 6,000 staff, was one of the last major privatisations of the Conservative years and completed in 1996. EDF has pledged to "recognise and appreciate" the importance of BE staff and safeguard their employment and pension rights.

Pierre Gadonneix, chairman and chief executive, said: "For EDF, this is an historic milestone in our strategic development plans in Europe.

"For British Energy it places it at the vanguard of new nuclear build in the UK and at the centre of the global nuclear renaissance."

The move reflects a global trend towards nuclear energy after oil prices soared earlier this year. It also comes amid growing calls from environmentalists to cut pollution from burning fossil fuels.

Last year the Government raised £2.34 billion through reducing its stake in the firm to 36 per cent, with proceeds also going towards the NFL.

The financial rescue also came with a warning from company chiefs that it would take time for BE to address "past under-investment and unacceptable output".

The company is seen as crucial to the development of the next generation of nuclear power as the new plants - are likely to be built on the current sites it owns.

Chief executive Bill Coley said in May: "We are uniquely positioned to participate in nuclear new build.

"Our sites are particularly attractive assets for a new build programme and we seek to maximise the value of those sites for our shareholders."

With wholesale electricity prices pushed ever-higher by soaring gas and oil prices providing a strong overall trading environment, the company which was fighting for its very existence less than six years ago could tell investors in June that a round of initial approaches undervalued the business and its prospects.

While BE shareholders will welcome a deal, EDF is likely to be just as keen to position itself for the UK's next major nuclear building programme.

British Gas owner Centrica is expected to take a minority stake in the business following the takeover, after drawing up plans for an all-share merger with BE if the deal with EDF collapsed.

Author: Jo Amey