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Centrica to take BE stake if EDF bid agreed

British Gas-owner Centrica will take a minority stake in British Energy if the nuclear power operator is bought by France’s EDF, a source close to the discussions said on Friday.

The source told Reuters an agreement had been struck between Centrica and EDF partly to appease the government, which has said it does not want the country’s nuclear industry under the control of a single party.

EDF has bid a little over 680 pence a share for BE, valuing the company at just under £11 billion. But BE, 35% owned by the government, last week rejected the bid as too low and is holding out for over 735p a share. “The agreement is two-fold. The government has indicated it would rather not see nuclear power under the control of one owner, while EDF does not have a need for all of the capital,” the source said, although he could not say what size of stake Centrica would receive. “It makes sense. If the EDF bid goes through, which is looking less likely now, there will be competition issues and these could be solved by a minority stake,” Evolution analyst Lakis Athanasiou said.

British Energy shares had slipped in recent days as hopes of a deal faded, although following the Centrica development they climbed back above the important 700 pence level to be up 2% to 706.5p by 1:07 p.m. Both EDF and Centrica declined to comment. BE has attracted takeover interest since the government gave the green light to a new fleet of nuclear power stations in January. The company owns eight power stations, all of which have surrounding land suitable for new build. Although BE held talks with many of Europe’s largest utilities, only EDF has come through with an offer. Industry sources said Centrica put forward an all-share merger proposal earlier in the year, but was rejected due to the absence of cash in the offer.

The government stake could be worth more than £4 billion to public finances if a deal goes through. (Reuters)