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US funds press France to increase €10bn EDF buyout price

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Several US funds are pushing the French state to raise its €10bn buyout offer to minority shareholders of energy utility EDF and asking France’s market regulator to recommend a price bump, adding to pressure from investors unhappy with the terms of the nationalisation.

The French government is moving to buy out the 16 per cent it does not already own in EDF, as the group grapples with production outages at its French nuclear reactors and soaring wholesale power prices in Europe, and gears up to build costly new plants.

The process reverses a 2005 privatization and subsequent fall in the power company’s stock price since it was listed at €32 per share, leading to opposition to the €12 per share buyout price from some long-term investors, such as employee shareholders.

US funds holding several hundred million euros worth of EDF shares, which include hedge fund TIG Advisors, have now called on France’s Autorité des Marchés Financiers (AMF) to challenge the offer price and recommended it be raised to €15.80 per share, according to a November 3 letter sent by lawyer Sophie Vermeille and seen by the Financial Times.

The funds have argued that disclosures over the impact of government decisions in recent years on EDF’s finances were insufficient and not taken into account by an independent consultancy hired by the utility to review the offer. They have also called for some changes to the terms of the tender and how bids are collected.

“By not allowing minority shareholders a chance to benefit from a fair price or from the necessary information to come to an informed opinion about the financial conditions, [the AMF] would be sending an extremely negative signal about Paris as a financial centre,” Vermeille wrote.

The AMF is due to rubber-stamp or raise objections to the bid, in a decision that could be made public on Tuesday according to the tender offer filings. The AMF, EDF and France’s economy ministry declined to comment.

Once the offer is launched, the government needs to reach a 90 per cent acceptance threshold from its 84 per cent holding before it is able to squeeze out the rest of the minority shareholders. EDF shares are hovering just under the €12 offer price level, after slumping close to all-time lows at €5.8 in March.

The state’s €9.7bn buyout offer includes a bid for EDF’s convertible bonds. The bid represented a 53 per cent premium to the company’s closing price before the nationalization was announced in July.

EDF, which last week cut its production forecast for the fourth time this year owing to reactor outages and maintenance programs, was also hit in January when the French government made it absorb the cost for its bid to cap rises in consumers’ power bills at 4 percent in 2022.

Vermeille told the FT the funds were not looking to derail the nationalisation, but pushing for more transparency around the process.

Some other shareholders are also calling for the price to be raised to at least €15 per share, such as employees who invested in the shares and own collectively about 1.5 per cent of EDF’s capital.

“Minority shareholders are being forced to sell at the worst time in EDF’s history,” said Martine Faure, a representative of the CFE-CGC union and chair of two employee shareholder funds.

French activist shareholder CIAM, which holds under 1 per cent of EDF, has also criticized the process.

“It’s clear that the price is not adequate when you see how the state has intervened and caused the share price to fall,” said CIAM co-founder Catherine Berjal. The AMF should be the one appointing an independent expert to review the offer, not EDF, Berjal added.

The AMF has options including choosing to take more time to review the tender offer. The government has been looking to move ahead as swiftly as possible as EDF’s various production woes tear into its core profit.