IFM Wades Into Naturgy Conflict With 5 Billion-Euro Move

IFM Global Infrastructure offered to buy almost a quarter of Naturgy Energy Group SA in a 5 billion-euro ($6.1 billion) move that could intensify a battle among investors to squeeze more value from the Spanish gas and renewables company.

Existing shareholders GIP and CVC-backed Rioja don’t plan to sell, and two people familiar with the situation said the private equity firms would work with IFM if the bid is successful.

They’ve both been pushing Naturgy to be more aggressive with asset sales and strategic changes, and have had a tense relationship at times with Chairman Francisco Reynes.

An alliance of the three investors would pit international private equity groups against an old Spanish guard in the form of shareholder Criteria Holdings. It’s headed by influential banker Isidro Faine, a bastion of the business establishment who served briefly as chair of Naturgy before being replaced by Reynes, a protege.

IFM Wades Into Naturgy Conflict With 5 Billion-Euro Move

IFM’s 23 euro-per-share bid sent Naturgy’s stock up 16% on Tuesday. It fell 15% in 2020, the worst performance in a decade. The deal would rank among the largest utility transactions in Europe in the last year, according to data compiled by Bloomberg.

Naturgy, which said it only learned of the offer on Tuesday morning, will comment “when it deems appropriate.”

Another potential complication in the offer is the role of the government, as any bid for more than 10% of a company deemed to be strategic must have cabinet approval. A Spanish government spokeswoman said Tuesday that the Industry Ministry hasn’t received any request from IFM, and it’s too early to evaluate.

Businesses such as Naturgy are attractive to yield-starved asset managers and private equity, such as IFM, desperate to beef up returns. They’re pouring money into renewable energy as well as sectors that offer steady and predictable revenues streams, such as regulated energy firms.

Green Push

Reynes has been seeking to cut costs and reduce the number of markets in which Naturgy operates since he took over the company in early 2018.

While the company is switching focus to green energy sources -- following in the footsteps of Enel SpA and Iberdrola SA -- it’s been slower than others to do significant renewables deals, to the frustration of some shareholders.

In November, Naturgy announced the 2.57 billion-euro sale of its Chilean unit to China Three Gorges. The company is building up a portfolio of solar and wind in Europe, and also owns clean generation in south America and Australia.

The utility owns 10 LNG tankers and is thought to be selling that unit. It approached potential suitors, including industry peer Repsol SA, in the early part of 2020 about a deal but interest was lukewarm amid slumping oil and gas prices.

That may be about to change as prices are set to recover in 2021, according to Bloomberg Intelligence, boosting utility earnings.

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