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French President to Meet on GDF-Suez Merger

French president Nicolas Sarkozy will host a meeting on Thursday that could help settle the fate of a planned 90 billion euro ($123 billion) merger between the country's utilities Gaz de France and Suez.

France's newly elected government has been keeping its options open on whether GDF should link up with Suez, a plan announced 18 months ago by the previous government, or whether it should continue on its own or possibly tie up with a foreign peer.

"Yes there is such a meeting at the Elysee (the president's office), but I cannot confirm who will take part in the meeting," an Elysee palace spokesman said.

Les Echos and affiliated newspaper the Financial Times reported on Thursday that President Nicolas Sarkozy and two of his ministers would meet to discuss the fate of the two French utilities. But Les Echos, citing a person familiar with the situation, said no definite decision would be taken.

Sarkozy, Prime Minister Francois Fillon and Finance Minister Christine Lagarde will discuss three options: a merger between GDF and French power giant EDF, a merger of GDF with a foreign company such as Algerian oil and gas company Sonatrach, or the merger between GDF and Suez, Les Echos said, echoing options Fillon spelled out last month for GDF.

Early 2006 the previous conservative government engineered a "merger of equals" between electricity, water and waste services company Suez and GDF, which runs Europe's largest gas transmission system, to fend off a possible takeover bid for Suez by Italian utility Enel.

But the valuation gap between the two utilities has widened, making such a deal more difficult. At Wednesday's closing share prices, Suez was worth 54.4 billion euros and GDF was valued at 37.6 billion.

Possible Solution

Suez shares slipped 0.5% to 42.18 euros and GDF shares and GDF fell 1.1% to 37.82 euros.

The FT reported that a 4 billion euro share buyback by Suez could be one way of unblocking the impasse and that both sides accepted this as a possible solution.

The merger plans were stalled when a French court ruled a tie-up would have to wait until the European Union opened up energy markets for competition on July 1, tying the deal's fate to the French presidential and parliamentary elections in May and June.

Meanwhile, Suez Chief Executive Gerard Mestrallet and GDF head Jean-Francois Cirelli have reiterated their support for the merger, both calling it the best project for their company.

Suez had been subject to speculation it could switch its focus to Spain after raising its stake in Gas Natural to 11%.

Conservative Sarkozy had said he wanted to examine whether GDF would be better off linking with another gas producer. But sources close to Sonatrach and one source close to GDF have dimissed as unlikely that the Algerian energy giant would buy a stake in GDF.