Bidding War Heats Up

The decision of the Endesa board to endorse the E.ON offer came as signs emerged of a new bidding war for Spain's biggest energy company.

Just hours after E.ON raised its takeover bid for Endesa for a third time Monday to 40 euros a share, Italian utility group Enel SpA confirmed it was pressing on with Spanish builder Acciona SA to launch a joint counter bid for Endesa.

E.ON's announcement that it was increasing its offer for Endesa from 38.75 euros came in the wake of a plan outlined last week by Enel and Acciona to launch a joint takeover of the Spanish energy group.

Endesa told Spain's securities regulator, CNMV Monday that its board of directors had decided unanimously to recommend to shareholders to accept the E.ON bid, which it said "reflects adequately" the value of the company.

The Endesa board went on to say that the E.ON offer was the only one to meet all legal requirements.

A rival joint bid for Endesa

Earlier in the day Monday, Acciona told the CNMV that it was joining Enel in a plan to top E.ON's latest offer by bidding what it said would not be below 41 euros for 100 per cent of Endesa.

"This forms the basis for Enel's development on the European electricity market," said Enel chief Fulvio Conti following the announcement of his company's pact with Acciona.

While E.ON's latest bid values Endesa at 42.4 billion euros, the Enel-Acciona offer would bring Endesa's value to 43.4 billion euros.

E.ON chief Wulf Bernotat said his company was "convinced that our increased offer at 40 euros a share will be the only one for Endesa in the foreseeable future."

A new force in the global energy market

A tie-up between Endesa and E.ON would create a new force in the global energy market with more than 22 million customers and a business empire stretching from Europe, through to the US and South America.

E.ON, however, needs at least 50 percent for its bid to succeed. Analysts believe that E.ON faces an uphill battle to secure control of Endesa as Enel and Acciona together already hold about a 46 per cent stake in Endesa.

Under their takeover plan, Acciona would raise its stake in Endesa to 50.1 per cent, while Enel would hold the rest.

The CNMV ruled Friday that Enel and Acciona could not launch a bid for six months after the E.ON bid expires and gave E.ON until Monday to improve its offer.

However, Acciona told the CNMV that the joint bid with Enel would be launched as soon as "legally possible." The CNMV is to due to issue a new ruling on the Acciona-Enel proposed bid before markets open in Spain on Tuesday.

E.ON takes legal action against rivals

But with tensions surrounding the Endesa battle rising, E.ON hit back launching legal moves against Enel and Acciona Monday and calling on the CNMV to mount action against the two companies for market disruption, breaching tender offer rules, and insider trading.

At the same time, E.ON said that Acciona and Enel should be forced to divest their shareholdings in Endesa and be prohibited from buying up any Endesa shares.

The German company also commenced court action in New York against Acciona and Enel, claiming that two companies had breached US disclosure rules.

In a strongly worded statement, E.ON lashed out at Acciona and Enel accusing them of "unlawful actions" which it said "were an attempt to deceive Endesa's shareholders and to manipulate the market price of Endesa stock."

This is the third time that E.ON has been forced to raise it bid since launching its takeover push in February 2006.