In a blow to Madrid, the European Union has given the green light to German energy firm E.On to buy Spanish power company Endesa. Spain has tried to block the takeover and faces possible disciplinary action.
The EU says a takeover is OK, but hurdles remain
"After examining the operation, the European Commission concluded that the proposed transaction would not significantly impede effective competition" in the European market, the EU's head office said in a statement.
But it added: "The commission will continue to keep the development in the German and Spanish gas and electricity markets and the other markets concerned under review."
Despite the green light, there are still hurdles to overcome before the 29.1 billion euro ($35 billion), which E.On announced in February, can be completed. The Spanish government is trying to block the bid in favor of a lower offer from Spanish natural gas provider Gas Natural SDG SA.
That set off protests and critics condemned what some see as a trend toward national economic protectionism in several EU countries.
While the EU did not immediately address that issue on Tuesday, it said it looked at the general situation on the European market and found there was adequate room for multinational integration. "The parties have limited overlapping activities in the electricity markets in France, Italy, Germany and Poland," the commission statement said.
E.On HQ in Düsseldorf
"In Spain, where Endesa is one of the two major operators in the electricity market, E.On is not active at all. The parties do not have any overlapping activities in the national markets for natural gas," it said.
According to EU officials, the commission is to launch disciplinary action against Spain next week over a decree which has threatened the German bid for Endesa. The development came hours before the commission ruled on the proposed takeover.
An official in Brussels Tuesday said the commission was set to launch a so-called EU infringement procedure against Madrid on May 3 over a Spanish government decree blocking the takeover.
Formally, the Spanish decree -- issued on February 24, four days after the German takeover was announced -- extends the role of national energy regulator CNE to deal with operations that involve a "strategic" public interest.
But analysts say the move is a means of making the sector less lucrative for a foreign bidder.