The French utilities company Suez-Lyonnaise des Eaux is reported to be seeking to take complete control of its subsidiary Société Générale de Belgique (SGB). The move, which would involve buying 36.4 per cent of the shares it does not currently own, looks likely to cost the company $3.94 billion.
Although the bid to take control of SGB has not been confirmed by either company, analysts are already interpreting the French company’s move as a wish to take a larger stake in the gas and power group Tractebel. SGB controls 50.3 per cent of Tractebel.
Tractebel has virtual control of Belgium’s gas and electricity markets. It has also been making growing investments in developing countries.
Foreign control of Tractebel is a sensitive issue. In 1988 the French company Compagnie de Suez took a 63 per cent stake in SGB in order to fend off a hostile bid from Italian financier Carlo De Benedetti. When Compagnie de Suez and Lyonnaise des Eaux merged in 1997, the Belgian prime minister demanded guarantees over the autonomy of Tractebel.
The present move could reawaken these sensitivities. Analysts are speculating that the prime minister might demand further independence of Tractebel’s board as a price for approving the bid.
One alternative solution being mooted is a merger between Tractebel and its power unit Electrabel. This would effectively dilute the French company’s stake in Tractebel. From a Suez-Lyonnaise point of view, this merger would give Tractebel access to Electrabel’s cash flow, which it would then be able to use for international investment.
The prospect has sent shares in Tractebel and Electrabel soaring. But the excitement might be premature. If they did decide to merge, it would take at least a year to finalise the details, according to one analyst.