Spain's Madrid government is believed to have granted approval for the controversial Gas Natural takeover of Endesa.

The combined Spanish giant will be one of the world’s largest energy companies following the approval. The hostile €22.4 billion takeover has already been approved by the energy regulatory authorities.

According to the BBC, Spain’s deputy prime minister Maria Teresa Fernandez de la Vega said: “The success of the transaction will produce increased competition and, as a result, an increase in the quality of the service and a reduction in prices. Vega added: “The deal is in Spain’s interest because the company that will be formed by the merger will be one of Europe’s biggest companies. Not only does it not damage competition, it fosters it.”

Nonetheless, the combined group is expected to be required to divest a considerable quantity of generation capacity and gas distributor Enagas, possibly to fellow Spaniards Iberdrola or Italian champion Enel which has been mooted as a possible suitor.

The news follows a recent decision from the European Court of First Instance in Brussels that the pending merger would not necessarily result in “serious and irreparable damage in the absence of interim measures (from the court).”

The European Commission, meanwhile, is determined to leave the matter to the Spanish authorities, despite the best efforts of Endesa management to have the takeover examined by European authorities.

Endesa could still appeal to the Spanish supreme court in a bid to block the alliance.

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