France buys parent of United Water
Tuesday, February 28, 2006
By Kevin G. Demarrais
The parent of United Water, North Jersey's biggest water supplier, is being sold to a utility holding company controlled by the French government.
State-backed Gaz de France SA on Monday said it would buy energy and water supplier Suez SA for more than $46 billion in cash and stock. The deal was finalized over the weekend to fend off a possible bid for Paris-based Suez by Italy's biggest power company, Enel.
In 2000, Suez purchased Harrington Park-based United Water for $1.02 billion. United Water, which started in 1869 as the Hackensack Water Co., owns water systems throughout the United States. Its United Water New Jersey unit delivers water to 1.2 million residents, including much of Bergen and Hudson counties.
"It is premature to offer any conjecture on how this would affect us," said Rich Henning, a United Water spokesman.
Because the full structure of the sale was not announced, it was uncertain Monday whether the deal will require formal approval from the New Jersey Board of Public Utilities.
"We will have to review the matter in order to determine whether the board's approval is needed," BPU spokesman Doyal Siddell said.
Past utility sales, including Suez's purchase of United Water, did require BPU approval and the board is currently reviewing Public Service Enterprise Group's proposed sale to a Chicago-based utility.
The sale to GDF, which would create a major new energy and environmental services company with a market capitalization of about $86 billion, is the latest in a series of attempts by European governments to defend what they increasingly see as national industries.
It was presented Monday as an answer to growing energy security concerns that France shares with many other governments -- particularly European neighbors affected by Russia's move last month to turn off Ukraine's gas.
But Italy saw a deeper kind of nationalism in the rushed French response to Enel SPA's interest in Suez, made public by the Italian company only last Wednesday.
The Italian government condemned France's "protectionist" move and called on the European Union to investigate.
The proposed GDF-Suez combination also ushers in the politically sensitive privatization of GDF. However, the legal structure of the deal -- in which state-controlled GDF would buy the much larger Suez -- may help France's conservative government to sell the deal to voters as elections near.
Finance Minister Thierry Breton opened talks with trade union officials Monday in an attempt to answer their objections to the merger, which would reduce the government's stake in the combined company to about 34 percent from about 80 percent of GDF. The government had promised to maintain control of GDF when it sold a 20 percent stake in the company in a public offering last year despite strong left-wing opposition.
The deal would generate about $595 million in annual savings without job losses, GDF and Suez pledged, creating a company with sales of $76.1 billion and Europe's largest gas transport and distribution network.