Chinese Bid 'Too Cheap': EDP

In its first public announcement, Portuguese power group EDP's management has said that a Chinese takeover bid for a majority stake is too low.

China Three Gorges late May 11 offered just over €9 billion ($10.8bn) for the remaining 76.73% of Portugal's main power group EDP that it does not already own. The Chinese state-run power giant offered a price of €3.26 per EDP share, representing a premium of 10.8% above the average EDP price during the past six months if dividends paid are included, and of a 17.8% if dividends are excluded. Some analysts believe the low premium is CTG's way of ensuring that not all EDP shareholders divest to it: CTG is requiring only majority control (50% of EDP voting rights plus one share) for its offer to be unconditional.

EDP issued a stock market filing May 15 saying that its management board "considers that the price offered does not adequately reflect the value of EDP and that the implied offer premium is low considering what is customary for European utilities where the offeror has acquired control."

The board said it shall issue a more detailed opinion in due course regarding the other terms of the offer, once CTG releases its draft prospectus including relevant detail such as its proposed Industrial Plan. EDP is active in the energy (electricity and gas) markets of Portugal, Spain, Brazil and the US; last year it generated over half of its power from renewables and hydro.

EDP is not the only Portuguese entity part-owned by a Chinese state company.  Portugal's gas and power grid operator REN is 25% owned by State Grid Corporation of China.