French utilities Suez and Gaz de France moved closer to clinching a 90 billion euro ($123 billion) merger after agreeing yesterday the financial terms for a deal that involves floating off shares in Suez’s Environment business.
Weekend talks produced an accord on how to solve the thorny problem of how to keep the marriage a merger of equals as was envisaged when it was first brokered by the previous conservative government in 2006.
Suez’s market capitalization has increased faster than that of GDF since then but a source close to the talks told Reuters yesterday that Suez has now agreed to shed part of its historic water assets, part of the Environment unit valued at nearly 20 billion euros.
“It is a very balanced deal organized around GDF’s core business. We are sticking with what was planned, the same parity and the same organization. It is a merger of equals,” the source said.
Keeping the balance
“The idea is that the new entity would keep 34-35 per cent of the environment activity and would keep control of it. The rest would be listed on the stock exchange.”
The move is in line with what was demanded by President Nicolas Sarkozy, who has recently stepped up pressure for a deal to be done even though trade unions remain firmly opposed to such a merger.
The financial details will now be put to the boards of the two companies for their consideration, the source said.
There were no details on another key issue – what share the state should take in the capital of any merged firm. A CGT trade union official said Sarkozy had indicated the state would have a stake of about 40 per cent but a representative of the FO union had said the stake would be 34 per cent, the minimum the state can hold under French law.

(Reuters)