“An investment for the independence of France” but an investment that could be costly to public finances. According to AFP, Bruno Le Maire indicated, at the end of the Council of Ministers, that the government plans to mobilize 12.7 billion euros for the renationalisation of the energy company EDF as well as for “any other operations that may be necessary ‘by the end of the year’. This amount is indicated by the amending finance bill, presented today.
Last Wednesday, Prime Minister Elisabeth Borne confirmed, before Parliament, “the intention of the State to hold 100% of the capital of EDF”. An announcement that immediately caused a 15% increase in the energy company’s share price. Two paths are possible for this renationalisation: the law, a very unlikely option, and a market operation, which is simpler and above all faster.
The State should therefore launch a takeover bid followed by a squeeze-out to acquire some 16% of the capital that it does not hold in EDF. To do this, it will appoint one, or even several, businesses that will carry out due diligence in order to determine the offer price. Currently, EDF is valued at 35 billion euros on the stock market (against 100 billion in 2005 when it was listed on the stock market).
The objective, during this first stage, is to convince enough shareholders to sell their shares to hold 90% of the capital. From this threshold, the shareholder (the French State in this case) then has the possibility of withdrawing the company from the Stock Exchange, because the securities remaining in the hands of the public are obligatorily contributed to a public squeeze-out offer ( OPRO), even if the remaining shareholders do not agree on the proposed price. Note that it is the Pacte law, so dear to President Emmanuel Macron, which lowered the threshold for compulsory withdrawal from 95% to 90%.
Reach the 90% threshold
The challenge for the State is therefore to reach this threshold of 90%. Its only lever to convince shareholders to sell their shares is the premium it can offer compared to its current price (around 9 euros per share this Thursday, July 7, an increase of 13% compared to the day before) . The stakes around this bonus are not negligible. If it were deemed too low, it could provoke the discontent of small shareholders, some of whom bought their shares at a high price.
The action was worth 32 euros in 2005, during the IPO of EDF. The offer should not be lower than 10 euros, which is the average target price at three months, according to the consensus. This would bring the bill for the State to 6 or 7 billion euros, depending on the bonus offered.
By way of comparison, even if it concerns another sector, the banking group BPCE offered last year, to buy back all of its listed subsidiary Natixis, a premium of 18% compared to the last closing price or 43% compared to the average price of the last 60 prices preceding the announcement of the purchase offer followed by a squeeze-out. An operation then delicate to manage for the mutualist group in terms of image, despite this bonus which fixed the price of the share at 4 euros, against 19.55 euros when it was listed on the stock market in 2006. Some of the clients of BPCE felt cheated by this withdrawal offer, especially since some of them had been advised by… their bank to buy these securities.
Watching out for small individual shareholders
The opening of EDF’s capital in 2005 was intended to be a fine example of “popular shareholding in France”. So it failed. However, it was clearly specified in the law allowing the opening of EDF’s capital that the State had to remain a shareholder with at least 70%, for the sake of “general interest”.
Today, EDF refuses to specify the weight of individual shareholders in the float. It must be important as long as institutional investors have taken care to lighten up, if not exit, from this company which continues to accumulate negative financial performances and which displays colossal indebtedness. “A value to be avoided for a long time”, entrusts us with a manager. But who could find however a new speculative attraction. As a result, the government has no interest in letting the matter drag on too long, at the risk of seeing the title appreciate, and therefore the final bill, become heavier for the State. However, no timetable has been put forward by the public authorities.