Iberdrola also had interest in SSE:
ScottishPower suitor Iberdrola yesterday revealed it had considered a bid for Perth-based Scottish & Southern Energy (SSE) in its quest for a European acquisition. However, the company said the attraction of ScottishPower's North American windfarm business had tipped the balance, while admitting that the UK was always the likeliest port of call because "that's where the shops are open". Energy businesses in France, Germany and Italy were highly attractive to the Bilbao company, but Iberdrola said it had been deterred by the obstructive attitudes of these nations to assets which are still, or have been until recently, publicly owned, such as Italy's Enel and EDF of France. "We would like to do things in these countries because their companies are less efficient than we are, but they have always been protected," Iberdrola said. "In terms of the liberalisation of the energy industry in Europe, the UK has led the way." This was an ironic admission on a day when the European Commission said Spain had again violated EU merger law by setting new conditions on a e37bn bid by German utility E.ON for Spain's Endesa. Meanwhile, Iberdrola's admission of interest in SSE adds weight to suggestions that Scotland's other utilities giant will soon find itself in the sights of predators.
"We have looked at every single company. Scottish & Southern is also an excellent company, but we felt that ScottishPower was a better fit, because of the mix of business and in particular the renewables presence in the US, which was the key deciding factor," Iberdrola said. "We would also have loved to get Scottish & Southern. They have shown they can do an excellent job and Ian Marchant is one of the best CEOs in the industry." Iberdrola said it had approached ScottishPower – not vice versa – and would not comment on whether it expects rival bidders to emerge. The lack of movement of ScottishPower's shares has been a clear signal that the City at least does not expect to see a challenger. French utility EDF refused to be drawn yesterday on whether it is interested. Asked on the sidelines of an Anglo-French forum on nuclear energy if EDF is interested in bidding for ScottishPower, EDF chairman and chief executive Pierre Gadonneix replied: "I am not allowed to comment and I cannot tell you either yes or no." Sweden's Vattenfall has also been tipped as a possible rival to Iberdrola, led by president Igancio Sanchez Galan.
Lehman Brothers said it does not see rival offers as likely, given that a large portion of the Spanish offer is based on tax benefits. Iberdrola yesterday accepted as broadly accurate analysts' figures stating that the company will be able to write off goodwill on the ScottishPower acquisition against taxable profits to the tune of e90m to e100m per annum over the next 20 years – or e1bn on a net present value basis."It (the tax advantage) was a helpful factor in the bid but it was not a decisive factor," Iberdrola said. Iberdrola offered reassurances over its commitment to Glasgow amid fears of job losses among the 6000 ScottishPower staff employed north of the border. Iberdrola's senior management will not visit the HQ at One Atlantic Quay until next week, but the company underlined its intention to maintain a Glasgow headquarters for the business in line with its commitment to sustain the ScottishPower brand. The company said it preferred to view the tie-up as a combination rather than a takeover, "because that's (Iberdrola's style)". It added: "It is clear when you do a transaction like this one there is always a certain overlap at the corporate centre level. However, despite the synergies (e130m a year) we intend to achieve, that will still leave a headquarters in Glasgow."Of course there are some functions that will disappear, for example, investor relations, because the shares are going to be Spanish shares. But we intend to leave an important number of people and functions at the headquarter level in Glasgow." The company added: "In terms of management, we would like to give enough incentive to the management team of ScottishPower so that they will stay with us. We want our companies to be operated by local teams. We think we can offer them challenging work as a larger group, with lots of investment going out into other countries." Iberdrola said it is far too early to say whether One Atlantic Quay will be maintained as ScottishPower's HQ, amid suggestions that it might end up relocating to its historic home of Cathcart on the south side of Glasgow. Ratings agency Fitch yesterday sounded a note of caution on the negative impact of the deal on the combined group's credit ratio. In the retail market, which is more developed in the UK, Iberdrola faces a "steep learning curve", the agency warned. There has been speculation that Iberdrola was always most interested in ScottishPower's electricity generation business, and particularly its large presence in windfarms in the UK and US, and could therefore look to dispose of the consumer-facing electricity and gas supply business. It had also been intimated that Iberdrola and venture capital firms might join forces to break up ScottishPower and split plum assets. The company dismissed this suggestion out of hand yesterday. "Absolutely not. All the venture capital firms in the world must have approached us (since Iberdrola's interest became public) about buying some assets. We have said very clearly, no. We are going alone and our intention is to keep all ScottishPower's businesses. We cannot say one or two years from now we will keep everything, but then we cannot give that guarantee about our businesses in Spain." The value of Iberdrola's bid rose slightly yesterday as the company's shares climbed over 4% on the Madrid Stock Exchange. The offer is now worth 784p a share to ScottishPower investors, equivalent to £11.7bn, which compares with 769p at the close of play on Tuesday and the original value of 777p a share. Meanwhile, in the latest twist in a test case for cross-border European mergers and acquisitions, the commission said it had made an initial assessment that the Madrid government illegally placed conditions on E.ON's bid for Endesa. "The European Commission has informed the Spanish authorities of its preliminary conclusion that Spain has violated Article 21 of EU Merger Regulation," the commission said in a statement. However, E.ON said on November 6 that it accepted the new conditions and is ready to proceed, meaning the commission decision should have little effect on the deal. 30.11.06