The proposed merger builds on existing cooperation and is the result of talks between the two companies, which began a few months ago.
The merger will be preceded by the payment of an exceptional dividend of EUR1.25 billion by SUEZ to its shareholders, equivalent to EUR1 per SUEZ share.
The exchange ratio in the merger after the proposed dividend will be one share for one share. This exchange ratio represents a premium for Gaz De France shareholders of 3.9% on the basis of the average stock price over the last three months, as of February 24, 2006.
Terms of governance of the new entity, currently being finalised, will be communicated to the market as soon as they are completed.
A European champion, world player in energy and environment
The new group, with revenues of EUR64 billion, will become one of Europe's leading players in energy and environmental services.
This transaction fully meets the strategic ambitions of the two groups, thus facilitating their accelerated implementation. The new group will benefit from an unrivalled position in terms of complementarity of skills, employee talent and quality of assets. The new group, with a strong Franco-Belgian identity, will be positioned as one of the global leaders in the energy and environment sectors. The energy asset portfolio, primarily located in France and Belgium, will allow it to benefit fully from the gas-electricity convergence (gas supply for electricity generation, dual energy offer of gas and electricity to customers) and to gear up to serve the fully liberalized energy market on July 1, 2007 successfully.
The merger between the two companies will create a European leader in gas and liquefied natural gas (LNG) with a secure, diversified and flexible supply portfolio. In an increasingly energy-dependent Europe, the critical size of the new group will make it a natural partner of large producing countries and will favour the emergence of major energy projects. The new group will continue to implement a dynamic development policy in its exploration and production activities. The combination of the industrial and commercial know-how of the two groups in the areas of energy and the environment will permit the new entity to compete on equal terms with the main players in a fully liberalised market, for the benefit of end-users.
With strong positions in its domestic markets, France and the Benelux, the new group will have the necessary financial and human resources to accelerate its international development.
The new group will become the fifth-largest producer of electricity, the operator of the largest European gas transport and distribution network benefiting from significant storage capabilities, and the leading energy services provider in Europe, as well as a world leader in water and environmental services.
An attractive project for all shareholders
The new group, with an increased weight in the stock market indices, will become a key stock market player in the utilities sector.
The proposed merger is expected to generate significant synergies in the short and medium term.
In the short term, it is expected that the group will be capable of generating EUR500 million in operational synergies per year before tax.
A significant portion of these synergies is expected to be generated from optimized supply strategies (portfolio optimisation, reduced procurement costs, increased LNG trading). The remainder will come from dual-energy offers, primarily in France, from the optimisation of energy services and from savings on non-energy related purchasing.
These synergies are expected to be realized in equal instalments over three years.
In the longer term, additional synergies are expected to result from the optimisation of the group's investment programme and the development of revenue synergies. The carry forward of existing tax losses will permit further substantial savings.
A favourable transaction for the stakeholders of both groups and job creation
This balanced transaction between the two groups will not generate any job losses. It will provide the group with sufficient resources and scale for the ambitious development which generates new jobs.
The public service mission of Gaz de France will be continued and maintained.
The status of the employees of Gaz de France and SUEZ will not be affected by this transaction.
This project has the support of the French and Belgian governments, which are important partners for both groups in the energy and environment sectors. The commitments made by SUEZ to the Belgian government at the time of the acquisition of Electrabel will be fully respected, in particular the development plan for the LNG terminal at Zeebrugge.
After confirmation of the exchange ratio by the commissaires aux apports, this merger will be submitted for approval by the Extraordinary Shareholders' Meetings of both companies, after having received the specific approval of the Commission des Participations et Transferts and the applicable competition authorities.
This proposed merger will be presented beforehand to the representative bodies of the employees.
As announced by the French Prime Minister, the Government will, in the shortest time frame possible, submit to Parliament a modification of the law of 9 August 2004, allowing a change in the minimum level of the government's ownership.
The transaction is scheduled to be completed in the second half of 2006.
SUEZ, an international industrial Group, designs sustainable and innovative solutions for the management of public utility services as a partner of public authorities, businesses and individuals. The Group aims to answer essential needs in electricity, natural gas, energy services, water and waste management. SUEZ is listed on the Brussels, Luxembourg, Paris, New York and Zurich stock exchanges and is represented in the major international indices: CAC 40, BEL 20, DJ STOXX 50, DJ EURO STOXX 50, Euronext 100, FTSE Eurotop 100, MSCI Europe and ASPI Eurozone. The Group employs 160,700 people worldwide and achieved revenues of 40.7 billion in 2004, 89% of which were generated in Europe and in North America.
Gaz de France is a major energy player in Europe. The leading European natural gas supplier, the Group has more than 45,000 employees, recorded net sales of EUR22.4 billion in 2005, and serves 13.7 million customers, including 11 million in France. Listed on the Paris Stock Exchange since July 2005, the Group joined the CAC 40 share index and the Dow Jones Stoxx 600 in September 2005.
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