European Commission approves Montedison takeover

Europe’s competition commissioners have approved the takeover by the Italenergia consortium of Italian industrial group, Montedison. The green light, given on Tuesday, came as a surprise to many observers who had expected the involvement of Fiat and Electricit௿½e France (EdF) to prove a stumbling block.

The regulator’s approval did, however, come with a proviso, that they would reopen the case if state-owned EdF – Europe’s biggest power company and Fiat’s junior partner in the deal – begins to exercise control over Montedison. The Montedison group includes power generator Edison – the only real rival to Enel in the Italian energy market.

It had been expected that the commissioners might have used their powers as a way of opening up the European energy market. France and Germany have so far refused to agree a fully liberalized market.

Fiat has a 38.6 per cent interest in Italenergia with EdF holding 18 per cent of the equity, but limiting itself to two per cent of the voting rights. Italian banking interests hold the balance of the stock along with Franco-Polish investor Romain Zaleski who holds 20 per cent.

As the Italenergia consortium is presently constituted, “the takeover will not adversely affect competition in the Italian electricity market,” the European Commission said in a statement. “Montedison will be controlled by Fiat and the latter has only a small activity in the electricity sector.”

But the Italian government, alarmed at the French giant’s incursion into its recently privatized market, passed an emergency decree in May limiting EdF’s voting rights to two per cent. The commission has to decide on the legality of this decree and a decision is expected next month. Even if the ruling was overturned, it is unlikely that EdF would immediately take steps to increase its voting rights in the group.

EdF has attracted criticism following acquisitions of interests in energy groups in Spain, Germany and now Italy, in addition to other European interests it already holds. Its ability to freely enter these markets contrasts with its home market, which has been very slow to open up and where EdF still has a dominant position particularly in the domestic consumer market.

The European Commission, which enforces EU rules, is investigating complaints that argue EdF benefits from illegal state aid because state backing means it gets a better credit rating and can borrow money more cheaply than privatized competitors.

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