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Pinault ready to buy Suez unit for €18bn

By Pierre-Angel Gay in Paris

October 12 2006

François Pinault, the veteran French corporate raider, has agreed to buy the environmental services arm of French conglomerate Suez for €18bn ($22.6bn) if Italian power group Enel makes a hostile bid for Suez, the Financial Times’ French sister newspaper, Les Echos, has learned.

Mr Pinault, via his family holding company Artemis, has secured financing to buy the water, waste and energy services business of Suez to back a secret deal signed with Enel in June.

The deal would be 10 times bigger than the purchase by Artemis in 1992 from French Bank Crédit Lyonnais of a portfolio of junk bonds issued by Californian insurer Executive Life, which triggered a raft of lawsuits.

But the French businessman is growing tired of waiting for Enel to unleash its hostile bid, and their agreement expired on September 30.

Enel has arranged financing of €50bn to mount a hostile attack on Suez . If Enel does not move soon, Mr Pinault could seek another partner to acquire the power generation and distribution assets of Suez .

Enel’s ambitions to acquire the electricity assets of Suez were revealed this spring, after French prime minister Dominique de Villepin, on February 25, announced plans for an agreed merger between Suez and state-controlled utility Gaz de France.

Consummation of that merger has been delayed by the need to seek French parliamentary approval, achieved this month, and divergence of the Suez and Gaz de France share prices, putting the proposed one-for-one share swap terms into question.

But Enel, in which the Italian government retains a stake, has continued to prepare a counter-bid for Suez . Initially, Fulvio Conti, Enel chief executive, thought he had persuaded Henri Proglio, of French-quoted environmental services group Véolia Environnement, to take Suez ’s environmental services arm.

Enel then tried to interest leading French private equity firms to acquire Suez Environnement.

Only Mr Pinault stepped forward. His team, code-named Wind, has drawn up detailed plans for the take-over.

The Artemis team is headed by Gilles Erulin and Gilles Pagniez, under the direction of Patricia Barbizet, Artemis managing director. Artemis is taking legal advice from Bruce Johnston, of Leboeuf Lamb Green. Its investment bank, Natexis Banques Populaires, has obtained financing through the London office of Deutsche Bank.

Enel, code-named Vulcan, is advised by Jean-Pierre Martel of Paris lawyers Orrick Rambaud Martel, with investment banking advice from François Kayat at Credit Suisse and Ricardo Bruno of Deutsche Bank.

• The board of Gaz de France will meet on Thursday to re-evaluate terms of its planned merger with Suez after the European Union indicated the group may have to sell all of its Belgian gas operations, Reuters reports.