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A summer wedding postponed

THE FRENCH government is continuing to declare its determination to merge Gaz de France (GdF) and Suez, despite growing opposition to the deal. However, it admits resistance has delayed until September plans to present parliament with the legislation needed to enable the deal.

Legislation to allow the state to cut its holding in GdF to less than 70% is necessary because, under the terms of the merger with Suez, the state's stake would inevitably fall below that level – to around 30%. However, such a development flies in the face of a guarantee the French government made last year about keeping majority state control of GdF, which persuaded the country's unions not to stand in the way of the company's partial privatisation.

It is those same bolshy unions that are now vociferously opposing the deal. This is ironic, given that the government is pushing through this economically dubious tie-up on the grounds it will help foster a national champion, protect French jobs and keep Suez out of the hands of Italy's Enel, which has been sniffing about the Franco-Belgium conglomerate.

This opposition by the unions has in turn spooked some members of the unpopular ruling UMP party, who fear further social unrest that could ultimately harm the party's electoral chances in the next parliamentary and presidential elections. Indeed, on 20 June, French gas and power workers took part in limited strike action, with the union claiming that between 20% and 60% of workers at the state power firm, Electricité de France, had refused to work, which cut overall electricity output by about 4%.

Nevertheless, the government and other advocates of the deal continue to preach its merits. At the World Gas Conference, in Amsterdam in June, GdF's chief executive, Jean-Francois Cirelli, defended the merger, arguing Europe needs strong companies to meet the huge investment challenges facing the gas industry. A combined GdF-Suez would help these companies raise the necessary investment as well as give them more clout in difficult talks with producer countries, he said. As such, he is confident the controversial merger will go ahead as planned.

"I am confident that the merger will go through for two basic reasons: first, it's the will of our two companies and is in the strategic interest of our companies and, I believe, in the strategic interest of Europe; second, our shareholders and, in particular, our main shareholders have clearly told us that they are supporting the deal," Cirelli told delegates.

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