EDF's British Energy takeover stalls

British Energy has yet to reach an agreement regarding a takeover by the French energy giant EDF.

The EDF chairman and CEO Pierre Gadonneix answers questions from journalists after a press conference today. British Energy, the nuclear power operator, said that it had yet to reach an agreement regaShow more

British Energy, the nuclear power operator, said today it had yet to reach an agreement regarding a takeover by the French energy giant EDF, while neither party gave a reason for a breakdown in talks. The BBC reported that major shareholders in British Energy, Invesco and Prudential, were holding out for a higher price owing to the surging cost of fuels. Meanwhile the British business secretary John Hutton told the public broadcaster that the government was "disappointed" at the failure to reach a deal.

The Labour government owns more than a third of British Energy but wants to sell its stake. "We are disappointed by the failure to reach an agreement overnight," Mr Hutton told BBC radio. "I think it would have been a good fit." "It's up to the board now and EDF to see if there is any way that this gap can be bridged." British Energy said in a short statement to the London Stock Exchange that "advanced discussions with a party have continued but without agreement to date," leading to a sharp drop in its share price early today.

EDF, the world's largest nuclear power supplier and already Europe's number one electricity producer, had been widely expected to confirm that a deal had been struck to buy British Energy, which has a market value of US$24 billion (Dh88bn). But in a statement late yesterday, Electricite de France, in which the French government is the majority shareholder, said conditions were not right for "a major development in Great Britain".

Elaborating at a press conference today in Paris, its chairman and chief executive Pierre Gadonneix said financial conditions enabling EDF to assume a bigger role in Britain had yet to come together. He added that, in light of a trend towards nuclear power in several markets, EDF ? which Friday declared a 12.2 per cent drop in half-year profits to 3.08 billion euros despite higher revenues ? intended to play a leading role.

A source close to talks with British Energy said yesterday that the French group's directors had backed a takeover. The bid was said to have been in the form of either a cash-only deal worth 765 pence per share or a cash option worth 700 pence a share plus shares, according to the Dow Jones financial news agency. The offer was aimed at the British government's 35.2 per cent stake in British Energy. Under British takeover rules, any bid for the government stake would trigger an offer for the rest of group.

In European stock market trading early Friday, British Energy's share price was showing a fall of 5.07 per cent to 692.50 pence on London's FTSE 100, which was down 0.61 per cent. EDF dropped by 0.63 per cent to 55.60 euros on the Paris CAC 40, which was 0.58 per cent lower. British Energy provides almost one fifth of Britain's electricity and owns and operates eight nuclear power stations. *AFP