E.On boost in Spanish power fight

Endesa's future has aroused strong feelings in Spain

German energy giant E.On has received a dual boost in its effort to buy Spanish utility Endesa as the acrimony over the battle for the business continues.

E.On claims rivals Acciona and Enel have misled investors over their plans.

Now Spanish regulators have ruled that Acciona and Enel must take a back seat until after investors have voted on E.On's 42.3bn-euro (£28.6bn) bid.

In addition, leading Endesa shareholder Caja Madrid said it would back E.On's offer if certain conditions were met.

E.On has stalked Endesa for six months and raised its offer on Monday. If successful in its bid, it would create one of Europe's largest energy firms.

Allegations

The long-running battle for control of Endesa has fuelled accusations of favouritism by the Spanish authorities, with critics saying Madrid has tried to keep the firm out of foreign hands.

Spanish construction firm Acciona and Italian utility Enel have built up significant holdings in Endesa over the last six months, and now control 46% of the business between them.

Energy firms are prized assets because of their stable returns

Some experts have interpreted this recent move as a thinly-veiled attempt to block a foreign takeover.

According to E.On, Acciona and Enel have behaved improperly by saying that they would make a joint 43.4bn euros bid for Endesa at a time when the company's shareholders were preparing to vote on E.On's offer.

E.On has urged Spanish regulators to open infringement proceedings against its two rivals and to bar them from making a future bid.

The German utility has also begun legal proceedings in the US, alleging their actions were designed to deceive Endesa's shareholders and manipulate the price of the company's shares.

Neither Acciona nor Enel have yet commented on these accusations.

Bid support

Spain's market regulator stated on Tuesday that it would not stop a rival bid.

However, it reiterated that any offer could not be made until six months after the 3 April deadline set for Endesa investors to support or reject E.On's offer.

E.On's bid gained further momentum late on Monday when Spanish bank Caja Madrid, which owns a 9.9% stake in Endesa, said it would lend its support under certain conditions.

It will cede control of its stake to E.On for two years as long as it retains its voting rights and has more say over the running of the firm. The agreement is conditional on E.On's bid being accepted by the rest of shareholders.

The news sent E.On's shares up more than 1% in trading in Frankfurt on Tuesday.