Caixin
May 16, 2018 10:53 PM
M&A

Quick Take: EDP Rejects Takeover Offer From China Three Gorges

Three Gorges first invested in EDP in 2011 and currently holds 23% of the company. Photo: VCG
Three Gorges first invested in EDP in 2011 and currently holds 23% of the company. Photo: VCG

Energias de Portugal SA has rejected 9 billion euro ($10.7 billion) buyout bid from Chinese state-owned utility China Three Gorges Corp., saying the price is too low.

In a Tuesday regulatory filing, EDP — Portugal’s largest energy company — said its board believes that the offered price does not adequately reflect the value of the company. “The implied offer premium is low considering what is customary for European utilities where the offerer has acquired control,” the statement said.

A successful bid for EDP would gain Three Gorges greater exposure to overseas energy markets like Brazil, Spain, and the U.S. The deal would be one of the biggest foreign acquisitions by a Chinese company since China National Chemical's $43 billion deal to buy Swiss agricultural giant Syngenta last year.

Three Gorges on Friday offered to pay 3.26 euros a share for the 77% of EDP it doesn’t already own. The Chinese power company first invested in EDP in 2011 and currently holds 23% of the company.

The Three Gorges offer represented barely a 5% premium on EDP’s previous closing price. EDP’s stock jumped to as high as 3.50 euros Monday, the first trading day after the bid announcement. The stock closed well above the offered price at 3.40 euros Monday.

The low price has sparked concerns that Three Gorges’ offer could be rejected. Three Gorges said that the offer represents a premium of more than 10% over EDP’s average share price in the past six months. But a market analyst said buyers have usually paid a premium of about 30% in similar deals.

The analyst said Three Gorges’ offer may be its first attempt, and the company may raise the price in following negotiations.

EDP didn’t elaborate in the Tuesday statement that whether it has completely rejected the deal. The company said it will issue its full opinion on the other terms of the offer “in due course.”

Contact reporter Han Wei (weihan@caixin.com)

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