The biggest takeover deal in Europe for several years is all set to go ahead, with the Spanish government clearing Gas Natural's hostile E22 billion takeover bid for rival Endesa.

The wrangling over the merger has been ongoing for months as Endesa tries to fight off the approach from its smaller rival. However a conclusion appears to have been all but reached after a last-ditch appeal to Brussels by Endesa was rejected.

The Spanish government has for some time hinted that it would clear the merger, despite Endesa’s grievances. However both the government of Jose Luis Zapatero and the Spanish energy regulator have conceded that the combined entity will need to make significant disposals to satisfy competition authorities. Among them, the new group will have to lose up to 4,300MW of generating capacity.

The new entity will become Europe’s third largest integrated utility in terms of customers. Mr Zapatero, the prime minister, has already stated that Spain would benefit from having a national energy champion in an era where energy supply security is an increasing concern.

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, said Spain’s deputy prime minister Maria Teresa Fernandez de la Vega in giving the green light.

Not only does it not damage competition, it fosters it.