The takeover speculation surrounding International Power which has been building for a few days refuses to die down.
France's GDF Suez is now - according to market gossip - top of the list of potential predators which previously included Warren Buffett, America's General Electric and Eon.
The new round of talk has prompted Bank of America/Merrill Lynch to crunch the numbers, and conclude Suez could afford to pay 385p a share for International Power. That compares to the current market price of 286.7p for the UK group, up 11.1p. Merrill analyst Eric Lopez said:
We have always argued that the fit between GDF - excluding [its engineering consultancy] Tractebel - and the International Power portfolio was excellent. In the US, both groups are exposed to the same states, in the Middle East both have a strong exposure to IPP [independent power producer] projects and in the UK International Power's generation assets would fit GDF's new ambitions to enter the UK power market. Only the Australian and Pakistani assets would not fit with the GDF portfolio in our view.
GDF has the balance sheet to make such a move. Assuming an offer with a 40% premium (385p), the total cost would be £11bn (including debt), or €12bn. We think such a deal makes sense from both a strategic and financial standpoint and see potential operational synergies between the two companies.
