Germany's E.On ends Spanish bid

Endesa's future aroused strong feelings in Spain

German energy giant E.On has withdrawn its controversial 42.3bn-euro (£28.6bn) bid for Spanish power company Endesa.

E.On said it believed its takeover offer for the firm, which had been opposed by the Spanish government, would not be successful.

The firm said it had reached a deal with rivals Enel of Italy and Spain's Acciona to split up Endesa's assets.

Enel and Acciona, Endesa's biggest shareholders, said they would launch a bid for the firm in the "near future".

If the new takeover bid was successful, E.On would acquire Endesa assets worth 10bn euros in a number of countries - including Spain, Italy and France, the German company said.

E.On said it had reached agreement with Enel and Acciona in order to "put an end to the substantial uncertainty surrounding the takeover bid for Endesa".

"Therefore, E.On will not carry out the takeover bid designed to acquire a majority stake in Endesa."

Legal action

E.On's attempt to acquire Endesa sparked controversy almost from the moment the firm's original 35bn-euro takeover bid was announced more than a year ago.

The long-running battle for control of Endesa fuelled accusations of favouritism by the Spanish authorities, with critics saying Madrid was trying to keep Spain's biggest power firm out of foreign hands.

The European Commission last month said it was taking legal action against Spain for interfering in E.On's bid.

EU regulators complained about conditions the Spanish government had imposed on the German firm to buy Endesa, saying they violated European competition rules.

Italian energy firm Enel and Spanish construction company Acciona revealed last week plans to make a 43.4bn-euro bid for Endesa - trumping E.On's offer.

E.On accused the firms of acting "unlawfully" in trying to mount the bid, while Spanish regulators ruled that Enel and Acciona would have to take a back seat until after investors had voted on E.On's 42.3bn-euro offer.

However, the agreement reached by the three firms now leaves the door open for Enel and Acciona, which currently jointly own 46% of Endesa.