Total to grow in power supply and renewables via Direct Energie M&A plan

French oil major Total SA (EPA:FP) is looking to expand in the field of power generation and supply through a planned acquisition of Direct Energie SA (EPA:DIREN), which boasts a 550-MW renewables portfolio and a 2-GW pipeline of similar projects.

Total announced on Wednesday that it has inked a deal to buy a 74.33% stake in Direct Energie from its controlling shareholders at a price of EUR 42.00 (USD 51.9) per share, ex-dividend of EUR 0.35 apiece, which is a premium of 30% over Direct Energie’s closing stock price on April 17. The total acquisition price is calculated at about EUR 1.4 billion.

As soon as this transaction wraps up, the buyer will file a mandatory tender offer at the same price. The board of Direct Energie plans to recommend the offer for approval by the company’s shareholders.

The acquisition of the controlling block of shares is expected to close in the third quarter of the year, subject to clearance from the European Commission. Total intends to use available cash to finance the takeover.

The move to buy Direct Energie aligns with Total’s goal in the electricity supply field to secure more than 6 million customers in France and over 1 million clients in Belgium by 2022. At present, the oil group has a 1.5-million client base and anticipates to add Direct Energie’s 2.6-million customer portfolio.

Direct Energie’s current installed capacity amounts to 1.35 GW and comprises an 800-MW gas-fired power plant and 550 MW of renewable power generating facilities, including onshore wind, solar, hydro and biogas. The company is also building a 400-MW gas-fired power plant and has 2 GW of French renewable power project in its pipeline.

In terms of power generation, Total’s objective is to have at least 10 GW of installed capacity within five year, it said. Presently, it has 900 MW.

(EUR 1.0 = USD 1.236)

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