Total entered into an agreement with the controlling shareholders of Direct Energie for the proposed acquisition of 74.33% of its share capital, at a price of €42 per share, ex-dividend of €0.35 per share, representing an aggregate acquisition price of approximately €1.4 billion. Once this acquisition has been completed, Total will file with the French Financial Market Authority (Autorité des marchés financiers) a mandatory tender offer on the securities of Direct Energie which are traded on Euronext Paris at the same price per share of €42, which represents a 30% premium above Direct Energie’s closing share price on April 17, 2018 and a 24% premium above the volume weighted average share price over the past three months and 13% above the volume weighted average share price over the past six months. The offer thereby values Direct Energie at approximately 12.5 times its 2018 projected EBITDA.
In the field of natural gas and electricity distribution to both consumers and professionals, Total is firmly establishing itself as a leading alternative supplier by combining its 1.5 million client portfolio with Direct Energie’s 2.6 million client portfolio. This combination will enable Total to pursue its ambitious development program to become a standard-setting player in electricity supply in France and Belgium, targeting over 6 million customers in France and more than 1 million customers in Belgium by 2022.
With this transaction, Total is also pursuing and expanding its development in the power generation market, with Direct Energie’s power generation activities offering an excellent complementarity with those of the Total group’s subsidiaries operating in these fields. Direct Energie’s installed capacity of 1.35 GW, including 800 MW of gas-fired power plant and 550 MW of renewable electricity, will supplement Total’s 900 MW installed capacity. Given Direct Energie’s project portfolio in this area (a 400 MW gas-fired power plant under construction and a 2 GW pipeline of renewable electricity projects in France), Total Eren in emerging countries and Sunpower in the United States, Total aims to have a global capacity of at least 10 GW of installed capacity within five years, either in the form of gas-fired power plants or in the form of renewable electricity capacities.
The transaction will be financed through Total’s available cash.
Interview with team at Ravetta Avocats
What plans did you set out prior beginning your work on this deal?
Our client and the other shareholders of Direct Energie had an ambitious schedule for the signing of the transaction. Our firm was solicited in a very short timing and we had to concentrate on the essentials of the deal, and not waste time on details. Since EBM Trirhena AG was selling a minority share, we had to check that the SPA terms were protective enough of its individual interests, keeping in mind the global economic balance, since other majority shareholders were involved simultaneously.
Along the way, what did not go to the plan you had set out? How did you work around this?
The situation of our client was singular considering it has sold part of its minority share a few months ago and was bound by a placement agreement. In the course of the negotiation, we have had to analyse the legal commitment of our client vis-à-vis its financial contractor and perform the necessary diligences in record time, so as to proceed safely to the transaction.
How does this transaction shape the future of the energy industry?
The merger of Total and Direct Energie is an illustration of the concentration trends active in the French energy market. Total will embody a serious competitor to the biggest historic players which are ENGIE and EDF. After the acquisition of Lampiris (renamed Total Spring), this transaction is another sign of Total’s strong will to grow rapidly and reach its ambitious goals to get 6 million clients in gas and electricity in France within 5 years. For Direct Energy, the support of a solid player like Total will certainly give the means to develop innovative services. We can only hope this transaction will stimulate even more the competition in the segment of residential clients, which have been slow to switch to market offers.