EDF: Taking over EDF, a boon for minority shareholders?

(BFM Bourse) – The conclusion of a bumpy seventeen-year stock market journey has begun. The government wants to bring EDF back into its fold, by buying a minority stake (about 15%) of the energy company’s capital still traded on the Paris market by next fall. Listed on the stock market in November 2005 with great fanfare, EDF has followed a path full of pitfalls. Between direct political decisions against shareholder interests and strategic roaming, back to the electric stock market journey.

Reuters quoted analysts at JP Morgan as saying that the French state, which owns about 84 percent of EDF, may launch a takeover offer to minority shareholders at a price close to 12 euros by next fall. The eventual redemption of minority rights could cost close to €10 billion taking into account the convertible bonds in circulation and a premium over the current share price, according to Reuters. However, the price likely to be offered to shareholders is a far cry from the introductory price, which was then set at €32 for private investors – €33 for professionals – in November 2005. Price then valuation of the file at more than €60 billion. With so many connections, the government at the time could boast that it connected its operations well since nearly 5 million French people were involved in privatization.

Tensions decrease in the Paris Stock Exchange

The energy company’s debut on the stock market was rather timid, with the title only managing to cross €40 in March 2006, before accelerating noticeably. Two years after its initial public offering, EDF recorded a stock market peak of €87.75 on November 22, 2007, valuing the company at more than €150 billion. It is enough to put him on the platform of the main tricolor capitals that year, he even outperformed the oil giant Total. The country also knew how to take advantage of this opportunity to unload 2.5% of the capital to 82.2 euros. Hence, selling 45 million shares would yield around 3.7 billion euros. Excellent timing in hindsight since the golden age of EDF in the stock market was short-lived. Her descent to hell began in 2008, against the backdrop of the mortgage crisis and the end of the commodity major cycle. Its share price fell from €73 at the end of 2007 to €41.5 on December 31, 2008.

Since then, the title has not recovered significantly. The Fukushima nuclear disaster in 2011 discredited nuclear power, forcefully pushing the EDF to the end of its troubles.

Since this tragedy, nuclear power no longer smells of holiness, neither among investors nor among politicians. For the first time in more than 10 years, a French government has dared question “all nuclear weapons”. In addition to this new situation that has caused a great deal of uncertainty about the future of nuclear power in France, the EDF must discuss the heavy debt inherited from the risky takeover of Areva and the many delays that can be counted as decades. , for the construction sites of the new generation of Flamanville (Manchee) and Hinkley Point reactors in the United Kingdom.

In 2015, EDF unfortunately celebrated the 10th anniversary of its listing on the Paris Stock Exchange. The energy giant was kicked out of the prestigious CAC 40 a few days before Christmas, due to a poor float and a chaotic stock market for the above reasons. The French leader was no more Lilliputian for the Paris Star Index, barely registering €13 at the end of the 2015 fiscal year. This symbolic exit of a majority state-owned group did not lack precipitation by an easing of stock market jitters. It is difficult for shareholders to follow the EDF in the stock market as the profile is highly dependent on political decisions, particularly on the thorny issue of the energy transition. The introduction of the Tariff Shield, which regulates the price of electricity for individuals in the regulated tariff, will not fail to dig further into the EDF accounts. At the end of 2021, EDF debt peaked at more than 40 billion euros and could drop to 65 billion euros according to Citigroup analysts. Especially since the energy company still has to put a hand in its pocket to finance the maintenance of the current nuclear fleet and the construction of the six future EPR 2 reactors announced by Emmanuel Macron.

A more protective exit door for shareholders?

Thus, the value of these two mega projects is estimated at more than 100 billion euros. Too expensive for a completely bloodless EDF. So, like the White Knight, the government led by Prime Minister Elizabeth Bourne announced last Wednesday the project to nationalize the energy company. Information that didn’t fail to feed the current buyer the file, as the EDF title has jumped 30% since this project was announced. The government will already consider launching a takeover offer at €12 per share to pull the energy company out of the stock market, JPMorgan said, citing Reuters. That is almost 62% less than its introductory price (€32), and even more than an 87% drop since its historic high in November 2007.

“It appears to us that common sense dictates that the takeover offer from minority shareholders should be computed by a plan of action that neutralizes this princely disposition against which the EDF has made an informal application against,” reads today’s note from Vernimmen’s letter. “This is likely to be the case, because the government has chosen the path of Opas [Offre publique d’achat simplifiée NDLR] It is followed by pressure, not nationalization, that is more protective of the interests of the minority shareholders because its success is conditional on the approval of 38% of them (6.2 / 16.2, to reach 90%) “add experts.

“Being a shareholder alongside a state is rarely an enviable position due to its dual role of political power and shareholder, which logically leads to choices that are not always in the best interest of the company,” the authors of the memorandum regret, adding that this situation may explain the existence of valuable discounts for joint stock listed companies. government, as evidenced by Renault or Eramet, which does not seem to compensate for the elimination of bankruptcy risks arising from the state contribution.

Sabrina Sadgui – © 2022 BFM Bourse

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