(BFM Bourse) – The epilogue of a bumpy stock market journey of seventeen years begins. The government wants to bring EDF back into its fold, by buying out by next fall the minority share (about 15%) of the capital of the energy company still in circulation on the Paris market. Listed on the stock market in November 2005 with great fanfare, EDF has followed a path strewn with pitfalls. Between political decisions directly against the interests of shareholders and strategic wanderings, a return to an electric stock market journey.
The French state, which owns nearly 84% of EDF, could launch a buyout offer for minority shareholders at a price close to 12 euros by next fall, according to JP Morgan analysts quoted by the agency. Reuters. The redemption of minority interests could indeed cost in the end closer to 10 billion euros taking into account the convertible bonds in circulation and a premium compared to the current share price, according to Reuters. The price that would potentially be offered to shareholders is however far removed from the introductory price, which was then set at 32 euros for private investors – 33 euros for professionals – in November 2005. A price then valuing the file at more than 60 Billions of Euro’s. With a lot of communication, the government of the time could boast of having well tied up its operation since nearly 5 million French people had taken part in the privatization.
Tension drop on the Paris Stock Exchange
The stock market debut of the energy company was rather timid, the title only managing in March 2006 to cross 40 euros, before accelerating markedly. Two years after its IPO, EDF recorded a stock market peak of 87.75 euros on November 22, 2007, valuing the company at more than 150 billion euros. Enough to place it on the podium of the main tricolor capitalizations that year, even outclassing the oil giant Total. The State also knew how to take advantage of this window of opportunity to offload 2.5% of the capital to 82.2 euros. The sale of 45 million shares will then have brought in around 3.7 billion euros. An excellent timing with hindsight since the golden age of EDF on the stock market did not last long. Its descent into hell began in 2008, against a backdrop of the subprime crisis and the end of the commodity supercycle. Its share price fell from 73 euros at the end of 2007 to 41.5 euros on December 31, 2008.
Since then, the title has never significantly recovered. The Fukushima nuclear disaster in 2011 came to discredit nuclear power, further pushing an EDF to the end of its troubles.
Since this tragedy, nuclear power is no longer in the odor of sanctity, neither among investors nor among politicians. For the first time in more than 10 years, a French government even dared to question “all nuclear”. In addition to this new position which has caused great uncertainty as to the future of nuclear power in France, EDF must debate with a heavy debt, inherited from the risky takeover of Areva and the many delays which can be counted in tens of years. years, of the construction sites of the new generation reactors of Flamanville (Manche) and Hinkley Point in the United Kingdom.
In 2015, EDF sadly celebrated its tenth anniversary of listing on the Paris Stock Exchange. The energy giant was ousted from the prestigious CAC 40 a few days before Christmas, given a weak free float and a chaotic stock market for the aforementioned reasons. The French flagship was no more than a Lilliputian of the Paris star index, listing barely 13 euros at the end of the 2015 financial year. This oh so symbolic exit for a group majority-owned by the State did not lack precipitate the drop in tension on the stock market. Difficult for shareholders to follow EDF on the stock market as the file is highly dependent on political decisions, particularly on the thorny issue of energy transition. The introduction of the tariff shield, which regulates the price of electricity for individuals at the regulated tariff, will not fail to dig a little more into EDF’s accounts. At the end of 2021, EDF’s debt peaked at more than 40 billion euros and could slip to 65 billion euros according to Citigroup analysts. Especially since the energy company still has to put its hand in its pocket to finance the maintenance of the current nuclear fleet and the construction of the six future EPR 2 reactors announced by Emmanuel Macron.
A more protective exit door for shareholders?
These two huge projects are thus valued at more than 100 billion euros. Too expensive for a completely bloodless EDF. So, like a white knight, the government under the leadership of Prime Minister Elisabeth Borne, announced last Wednesday the project to nationalize the energy company. Information that has not failed to feed the current buyer on the file, the title EDF having jumped 30% since the announcement of this project. The government would indeed consider launching a takeover bid at a price of 12 euros per share to withdraw the energy company from the stock market, according to projections by the bank JP Morgan cited by Reuters. This is almost 62% less than its introductory price (32 euros), and even more than 87% decline since its historic high in November 2007.
“It seems to us that logic would dictate that the takeover offer from minority shareholders should be calculated with a business plan that neutralizes this princely act against which EDF management has brought an informal appeal” is it mentioned in the note of the day from the Vernimmen Letter. “It will probably be the case, since the government has chosen the path of OPAS [Offre publique d’achat simplifiée NDLR] followed by a squeeze-out, and not that of a nationalization, more protective of the interests of minority shareholders because its success is conditional on the agreement of 38% of them (6.2/16.2, for reach 90%)” add the experts.
“Being a shareholder alongside a State is rarely an enviable situation because of its dual role of political power and shareholder, logically leading to choices that are not always in the interest of the company” deplore the authors of the note adding that this situation may explain the existence of value discounts for companies listed on the stock exchange with state shareholding, as evidenced by Renault or Eramet, and which do not seem to compensate for the elimination of the risk of bankruptcy induced by state shareholding .
Sabrina Sadgui – ©2022 BFM Bourse
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