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Gaz de France, Suez move to win E.C. deal approval

Key vote by French parliament still ahead

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LONDON (MarketWatch) -- Gaz de France and Suez on Thursday outlined a number of steps to win approval from the European Commission for their $50 billion merger, including disposing off a unit that sells natural gas as well as a stake in a Belgian electricity firm.

Gaz de France (GAZ) and Suez SZE, (012052) said they'd set up a new company, which will have Distrigaz's (000380219) assets as well as contracts for the sale of gas to SPE, the Belgian electricity provider.

This new company would then be sold to an outside firm, with Gaz de France and Suez saying they'd like to get assets instead of cash in return.

In addition, Gaz de France also agreed to sell its 25.5% stake arm in SPE. Other changes the companies agreed to include new corporate governance rules for Belgian gas distribution arm Fluxys and a gas-release program for France and Belgium.

A gas-release program is when gas is sold for a temporary period of time to other providers, said a spokeswoman for GdF. It's been used by other companies as the European energy market has opened up, she added.

Shares of Suez dropped 1%, while Gaz de France rose 0.2% in morning trading on Thursday. Distrigaz's thinly traded shares declined 1.7%. Also see Europe Markets.

Europe's regulators have previously expressed concern that a tie-up of the two French companies would lead to dominance of the Belgian gas market. Suez already controls Belgium's Electrabel and Gaz de France also has operations in the country.

The European Commission separately on Thursday said it was pushing back its review until Nov. 17 from an original deadline of Oct. 25.

Meanwhile, the two companies also are readying themselves for a vote on a bill from France's parliament that is needed to push the deal through.

French law currently prohibits cutting the government's stake in GdF below 70%, and the proposed deal between Suez and GdF would have the French state owning about a third of the company, down from about 80% now.

Getting the bill through parliament won't be easy. Those opposed to the deal have tabled nearly 140,000 amendments, leading to speculation the French government could try a procedure to change the law without a vote. The vote in the French parliament is scheduled for Oct. 3.

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