Spain Opens Investigation Into Utility Bidding War --- TXU of U.S., Belgian Firm Suspected of Violating Takeover Restrictions
MADRID -- Spanish stock-market regulators formally opened an investigation of TXU Corp. of the U.S. and Electrabel SA, Belgium, as well as several executives, for allegedly violating Spanish takeover rules.</br></br>The two companies are suspected of acting in concert last month when buying a combined 29% stake in Spanish power company Hidroelectrica del Cantabrico SA in the midst of a takeover battle for Spain's smallest utility. Spanish takeover rules require acquiring companies to launch a bid for 100% of the target company once a 25% stake is acquired. The Spanish Stock Market Commission, or CNMV, will draw up formal charges and take testimony from all three companies during the investigation, which could take months. Both companies' voting rights in Cantabrico have been suspended.</br></br>If the two utilities are found to be in violation of Spanish securities law, they could face fines of as much as 50 million pesetas ($275,200). The CNMV could also force the companies to launch a full takeover bid at 24 euros ($21.98) a share, the price of the last, failed bid for Cantabrico.</br></br>TXU Europe PLC Chairman Phil Tuberville denied any wrongdoing and promised to cooperate with the investigation. At the same time, he insisted that TXU would support any takeover bid of Cantabrico by another company.</br></br>TXU and Electrabel set off the controversy by jointly acquiring some 15% of Cantabrico from two of its core shareholders, Banco Sabadell and savings bank La Caixa, in early July. In the deal, conducted by investment bank Lazard, TXU acquired an additional 5.25% of the Spanish utility, bringing its total stake to 19.25%. Electrabel took a 10% stake in the same operation.