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2 February 2007 - European Union (EU) regulators have started a legal challenge against Spain because Madrid has disregarded a deadline to lift key conditions on Eon AG's €37bn ($48bn) bid for Spain's biggest electricity company Endesa.
A "letter of formal notice" to the Spanish authorities is the first step in a legal procedure that could end up before the EU's highest court. Seeking to avoid a high-profile clash with the EU, Spain had scrapped earlier restrictions to the German company's takeover offer but set out a new list of conditions on 3 November last year.
The European Commission, however, ruled certain parts of the conditions illegal and had given Spain until 19 January to withdraw them.
"To date, the Spanish authorities have not informed the Commission of any steps or measures taken" to comply with its 20 December demand to scrap certain conditions, said EU spokesman Jonathan Todd.
"The Spanish measures are illegal and have to be withdrawn," said Todd, saying the EU's executive arm has the exclusive right to rule on large takeovers that affect the European market. Spain's Socialist government strongly backs a competing bid for Endesa from Spain's Gas Natural SA worth about €20.9 bn that it is in the national interest to have a strong global energy company owned by Spaniards.
The EU Commission had objected to Spain's initial conditions to stave off Eon in September, and said on Wednesday that Spanish concessions on those measures "are not sufficient to comply fully" with EU demands. The Commission insisted the new conditions set by Spain in November were also illegal.
The latest conditions would force Eon to keep Endesa's brand name for five years, forbid it from selling Endesa's electricity assets outside mainland Spain and keep Endesa's coal-powered plants using Spanish fuel. Eon also had to promise not to adopt "strategic decisions" on Endesa and Spain's security of supply that would be "contrary to the Spanish legal order."
EU regulators have said those conditions broke EU rules on the free movement of capital and the freedom to set up business anywhere in the 25-nation bloc.
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