Executives at Suez and Gaz de France are holding weekend talks to try and seek a deal on a 90 billion-euro (US$123 billion) merger, with both utilities expected to hold board meetings later on Sunday. Trade unions, who are opposed to the deal, say they have had indications that the final details are being discussed — the FO union has said state-controlled GDF’s board was due to meet at 6 p.m. (1600 GMT) and that Suez’s board would also meet on Sunday. GDF and Suez declined to comment and French President Nicolas Sarkozy’s office has also declined to comment on the merger talks. However, the unions said details seeping out over the weekend suggested the endgame was in sight for a deal that was brokered by the previous conservative government at the start of 2006 to fend off a feared takeover bid for Suez by Italy’s Enel but which has dragged on into a new French presidency. A FO union official said on Saturday the plan was for the merged group to focus on the energy businesses, which analysts have said in one way to solve a financial impasse that has cropped up since the merger plans were first unveiled.
Suez’s market capitalisation has increased faster than that of GDF since then, preventing it from being the merger of equals that was initially envisioned. Analysts have said that for the deal to remain the merger of equals that was envisioned at the outset Suez must shed assets and distribute the receipts of such sales to its shareholders through a special dividend. And Suez has, according to sources close to the situation, bowed to pressure from Sarkozy to split its business and shed part of its historic water assets — the environment unit valued at nearly 20 billion euros — to salvage the deal. Another issue under close scrutiny is what share the state should take in the capital of any merged firm. A CGT official said on Saturday Sarkozy had indicated the state would have a stake of about 40 percent but the FO official said the plan on the table would leave the state with 34 percent, which is the minimum it can hold under French law. Whatever the size of the stake, the government is guaranteed a rough ride from some trade unions, with the CGT saying it would oppose any merger, not least because it would be an effective privatisation of GDF.