Gas ambitions push French oil major to buy electric utility firm

French oil major Total has decided to buy its compatriot electric utility company Direct Energie in a deal worth about €1.4 billion ($1.7B) in a bid to accelerate its ambition in gas and electricity in France and Belgium. 

Just last month Total closed the acquisition of the Danish oil and gas company, Maersk Oil.

This deal, worth about $7.4 billion, brought Total around 1 billion barrels of oil equivalent of 2P/2C reserves and resources, mainly in the OECD countries, and a production of about 160,000 barrels of oil equivalent per day (boe/d) in 2018, ramping up to more than 200,000 boe/d by the early 2020s.

Total said on Wednesday it has now entered into an agreement with the controlling shareholders of Direct Energie for the proposed acquisition of 74.33% of its share capital, at a price of €42 per share, ex-dividend of €0.35 per share, representing an aggregate acquisition price of approximately €1.4 billion.

Once this acquisition has been completed, Total will file with the French Financial Market Authority a mandatory tender offer on the securities of Direct Energie which are traded on Euronext Paris at the same price per share of €42, which represents a 30% premium above Direct Energie’s closing share price on April 17, 2018 and a 24% premium above the volume weighted average share price over the past three months and 13% above the volume weighted average share price over the past six months.

Total emphasized that the offer thereby values Direct Energie at approximately 12.5 times its 2018 projected EBITDA.

Direct Energie’s board met on Tuesday and unanimously approved the transaction and has already announced its intention to recommend to shareholders to tender their shares into the offer that will be filed.

Patrick Pouyanné, Chairman and CEO of Total, commented: “Through this transaction, Total is actively pursuing its development in electricity and gas generation and distribution in France and Belgium. 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, in line with our ambition to become the responsible energy major.”

In the field of natural gas and electricity distribution to both consumers and professionals, Total is combining its 1.5 million client portfolio with Direct Energie’s 2.6 million client portfolio. This combination will enable Total to pursue its development program to become a standard-setting player in electricity supply in France and Belgium, targeting over 6 million customers in France and more than 1 million customers in Belgium by 2022.

With this transaction, Total is also pursuing and expanding its development in the power generation market.