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Confirmation that British Energy (BGY) is in talks with interested parties sparked a flurry of news and speculation about its future and led the shares to soar 15%. in a matter of days. The furore died down somewhat but fresh speculation that major stakeholder, the Government, would not oppose selling to foreign rivals has set the shares alight again.

Among possible suitors of the UK’s largest generator are Germany’s RWE and EON, France’s EDF and Spain’s Iberdrola. The rumour mill is also suggesting that British Gas owner Centrica (CNA) could step in with a £10 billion bid to keep the company out of foreign hands.

This comes after a white paper last January showed the Government’s intention to expand its nuclear power programme, in which British Energy wants to play a ‘pivotal role’. The Government, which saved British Energy from bankruptcy in 2002, acquired a 35% stake as part of the bail out and could block any entity from acquiring more than 15%. However, it doesn’t look like it is particularly fussy about who it sells to, sending the doors wide open and the shares up around 5% higher on Monday (25 March) at 651p – albeit still far from the 750p highs reached in 2006.

Evolution Securities analyst Lakis Athanasiou believes the Government should sell at once, adding that if it decides to sell its stake to a single bidder, this would kick off a pure takeover battle. However he says it is more likely that the bidders will choose a ‘joint venture with British Energy over new nuclear and purchase the Government stake as a means of preventing rivals bidding for British Energy [as a whole] and blocking the joint ventures’.

Shares says: British Energy shareholders will benefit from the nuclear programme, and takeover news could also lift the shares higher.

by: Carlo Svaluto