By Geert De Clercq
PARIS (Reuters) - Oil major Total (PA:TOTF) said it will buy a majority stake in French electricity retailer Direct Energie (PA:DIREN) in a 1.4 billion euro deal that will make it a major challenger to state-owned market leader EDF. (PA:EDF)
Total has entered into an agreement with the controlling shareholders of Direct Energie to buy 74.33 percent of the firm's capital, it said in a statement.
It will pay 42 euros per share, a 30 percent premium over the April 17 closing price and a 24 percent premium over its three-month average price.
"This friendly takeover is part of the group's strategy to expand along the entire gas-electricity value chain and to develop low-carbon energies," CEO Patrick Pouyanne said.
Total - which entered the French retail power market in 2016 with the acquisition of Belgian power retailer Lampiris - has 1.5 million French electricity customers and will add 2.6 million clients with the acquisition.
Total said it aims to become a leading player in power supply in France and Belgium, and is targeting over 6 million customers in France and more than 1 million in Belgium by 2022.
Total is one of several newcomers in French power retailing, which was opened to competition a decade ago. EDF still dominates with a market share of about 85.5 percent of consumption.
Gas and power utility Engie (PA:ENGIE) had 3.8 million electricity clients in France at the end of December.
DEAL APPROVED BY DIRECT ENERGIE
Direct Energie CEO Xavier Caïtucoli told Reuters that Pouyanne had asked him to remain as the head of Direct Energie as it is integrated into Total. He said no decision had been taken on whether to keep the Direct Energie name or to switch to the Total brand.
Once the deal is completed, Total will launch a tender for the rest of Direct Energie's shares at the same price of 42 euros per share. The offer values Direct Energie at about 12.5 times its 2018 projected core earnings, Total said.
Direct Energie’s board has unanimously approved the transaction.
Shares in the company surged 30.5 percent to 42.08 euros, roughly the level of Total's offer, while Total shares were up 0.4 percent.
The deal will combine Direct Energie's installed power generation capacity of 1.35 gigawatts - 800 megawatts of it gas-fired and 550 megawatts from renewables - with Total's 900 megawatts. Direct Energie also has a development pipeline of 2.4 GW of mainly renewable energy capacity.
Total said it aims to have a global capacity of at least 10 GW of installed capacity within five years.