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Viag merger moves closer
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September 1, 1999: 6:13 a.m. ET
German utility confirms 'framework' of deal with rival Veba
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LONDON (CNNfn) - Shares in German utility conglomerate Viag surged Wednesday, as investors began to take on board the likelihood of a merger with its domestic rival Veba.
Viag chief executive Wilhelm Simson confirmed Wednesday that talks with Veba have established a framework for a deal. "We have dealt with the key points," he said, although he admitted that some key questions have yet to be resolved.
"There's strong evidence from many sides that this deal is well advanced," one London-based analyst who declined to be named told CNNfn.com.
Veba shares jumped about 5 percent before slipping back somewhat.
Simson said a board meeting to vote on a deal could be held within two or three weeks.
Simson and Veba chief Ulrich Hartmann are holding talks on a potential deal Wednesday with Edmund Stoiber, the prime minister of Bavaria. The southern German state owns a 25 percent stake in Viag.
The Bavarian finance ministry confirmed Tuesday that that state authorities have discussed a combination with rival Veba, and are broadly in favor of a deal. Bavaria also stated that moving the new company's headquarters outside the state, probably to Veba's current base in Düsseldorf, would not be a problem.
A combined company would be worth more than $40 billion and have annual revenue of 64 billion euros ($67 billion).
Reports of a deal linking Viag's Bayernwerk subsidiary and Veba's Preussenelektra unit first surfaced after the plan was run past the German cartel office, to see if it stood a chance of gaining regulatory approval.
Preussenelektra is Germany's number two electricity supplier with 13 percent of the market while Viag is ranked third with 8 percent. The market leader in Germany is RWE.
The German electricity market, formerly dominated by companies linked to local municipalities and state governments, is being liberalized.
"This is now a pan-European market, and clearly there will be more deals," the analyst told CNNfn.com.
Viag shares soared 8 percent Wednesday to 21.40 euros, continuing the upward trend they have been on since rumors a of a deal first broke.
Veba stock was up more than 3 percent to 62 euros.
-- from staff and wire reports
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