Electricite de France SA has offered about 2 billion euros ($2.2 billion) for the reactor businesses of Areva SA, the troubled French builder of atomic plants, according to a person familiar with the situation. The non-binding offer opens the way for an unspecified period of negotiations and due diligence between the companies and the French government, which controls both, said the person who could not be named because the talks are private. EDF Chief Executive Officer Jean-Bernard Levy said May 19 that if the proposed deal goes through to take over Areva's reactor and maintenance division -- known as Areva NP and employing 15,000 people -- it would become a majority-owned unit able to form partnerships with other French or foreign companies. Les Echos reported that it could be spun off and listed. EDF's offer also includes Areva's engineering division whose 1,200 engineers design and develop reactors and would be absorbed into its own ranks. The size of the bid was reported earlier by Les Echos, which said the valuation is based on 7.5 times earnings before interest, taxes, depreciation and amortization. The deal would cover about one-third of Areva's financing needs, estimated at 7 billion euros, the newspaper said, citing an unnamed source. A spokeswoman for EDF declined to comment as did a spokesman for Areva. In parallel to talks with EDF, Areva is also speaking with other potential partners, Chief Executive Officer Philippe Knoche said Thursday at Areva's annual shareholder meeting near Paris. Both Areva and EDF have raised the possibility in the past of forging ties with Chinese partners and are planning to develop two reactors in the U.K. with China General Nuclear Power Corp. and China National Nuclear Corp. Engie, formerly known as GDF Suez SA, is interested in combining the international operations of Areva's nuclear maintenance business with those of the utility, CEO Gerard Mestrallet said Saturday on Europe 1 radio. This could be done through a purchase of a stake, he said. If EDF takes over Areva's reactor business, it is seeking guarantees against the company's liabilities in Finland, where a project to build an atomic reactor is over budget and years behind schedule. Representatives of unions at Areva met with Economy Minister Emmanuel Macron on Friday, who said the French nuclear sector needs a new strategy. "Just transferring the reactor business to EDF creates more problems than it solves," Jean-Pierre Brachmann of the CFDT union said. "Some of our clients are competitors of EDF. You can't destroy the commercial side like that." State-controlled Areva also mines uranium, makes nuclear fuel and recycles nuclear waste. It's seeking to shore up its finances after record losses caused by mismanaged projects as well as a retreat from atomic energy in countries including Japan and Germany. Source: Bloomberg
