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Suez in knockout bid for Econergy

Created:
13 June 2008
Written by:
Graeme Davies

Energy giant Suez has made a 45p a share cash offer for Econergy International , leaving rival Trading Emissions' bid of 30p a share looking dead in the water. The 50 per cent premium to the Trading Emissions offer illustrates Suez's superior cash resources, and could be a knock out blow.

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Econergy's shares had fallen heavily before the bid process began, bottoming at 23.5p in April, as investors became concerned how the group would finance its pipeline of clean energy projects. Some of its debt needs refinancing as soon as next month, and it may need a player with pockets as deep as Suez to take full advantage of the South American clean energy projects that Econergy has in its portfolio. Indeed Suez is prepared to make a $50m (£25.4m) loan available to Econergy as soon as it has acceptances from more than 50 per cent of its shareholders.

SHARE TIP UPDATE:

Buy

Losing out on Econergy would be a disappointment for Trading Emissions, but not a disaster. Its offer was an opportunistic one, reflecting the trouble that Econergy had got itself into, and Trading Emissions still has plenty of work to do on its own portfolio. Its shares are marginally above our recommendation (Buy, 135p, 31 August 2007) and remain a buy at 137.5p. Econergy investors should sit tight for now, just in case a bidding war unfolds.

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