Marriage of International Power and GDF Suez admits few impediments

International Power's flirtation with GDF Suez is more promising. True, today's mammoth document contained everything bar the important information – such as price, debt structure and the amount of cash the French would be willing to hand to International Power's shareholders. But the broad outline of a deal – a reverse takeover in which GDF Suez would inject various assets in exchange for a majority shareholding in a company that would still be listed in London – seems roughly right. The point about International Power is that, even with a market capitalisation of £5bn, it's a tiddler in an energy industry populated by groups such as E.ON. In the old days of cheap and easy credit, this was never an impediment to its ambitions to build and operate power stations in the Middle East, far east and Latin America. These days, however, balance sheet strength really matters. Neil Woodford of Invesco Perpetual, one of International Power's biggest shareholders, suggests the UK company could reduce its cost of borrowing for one-off projects by 200 basis points, or two percentage points, if it combined with GDF Suez. After all, the French company is regarded by the markets as almost as creditworthy as the French state, its largest shareholder. Add the extra muscle in buying equipment for power stations and the numbers start to look attractive, as does the greater geographic spread of assets. But what about the governance headaches of being in partnership with a semi state-owned French company? Well, they don't look too daunting. If EdF of France can be entrusted with British Energy, what's the fuss? It should not be too difficult to devise an arm's length corporate structure. The real issue is the premium International Power's shareholders should receive for surrendering control. If GDF Suez is prepared to pay up on that score, there's a deal – albeit an unconventional one – to be done.