Cross-border case study: Eni acquisition of Distrigas

Slaughter and May advised Eni S.p.A. ("Eni"), the Italian integrated energy company, on the acquisition from Suez-Tractebel SA ("Suez") of its 57% stake in the Belgian company Distrigas NV/ Distrigaz SA ("Distrigas"), which completed on 30 October 2008. Distrigas has been the leading supplier of natural gas to industrial customers, natural gas resellers and electricity producers in Belgium for over 75 years and also has operations in France, Germany, Luxembourg and the Netherlands.

We were brought into the transaction by our "best friend" in Italy, the leading Italian firm Bonelli Erede Pappalardo, to advise their client, Eni. The transaction was of strategic importance as Belgium is a key country in the European gas market due to its geographic position and its high level of interconnectivity with the central-north European gas transit networks. Our multi-specialist approach enabled us to assemble a small, focused team that could deal with the different facets and demands of the transaction without the need to field a large number of lawyers. Belgian advice was provided by Altius with whom we formed an integrated team.

The transaction required complex technical advice and strategic planning. The acquisition of Suez's majority stake in Distrigas followed a competitive auction process involving a large number of the major European gas companies. In addition, there were a number of important issues connected with the acquisition that were required to be considered in parallel with it.

In particular, at the same time as negotiating with Suez, Eni entered into discussions with another major shareholder in Distrigas, Publigas CVBA/SCRL ("Publigas"), in relation to the future management of Distrigas. It was important for our client to come to an agreement with Publigas as they owned 31.25% of Distrigas and had pre-emption rights in relation to Suez's majority stake in the company. As a result of these discussions, a shareholders' agreement was entered into between Eni and Publigas, as part of which Publigas agreed to waive its pre-emption rights.

In addition, certain of Distrigas' shares are listed on the Euronext Brussels stock exchange and the acquisition of Suez's majority stake in Distrigas requires a mandatory tender offer to be made by Eni for all other Distrigas shares in accordance with Belgian takeover laws. At the same time as agreeing the acquisition of Suez's majority stake and the arrangements with Publigas, Eni was also engaged in discussions with the Belgian financial regulator regarding this consequential tender offer in order to obtain certain confirmations and derogations in respect of the application of the Belgian takeover laws to that offer.

The transaction required innovative thinking. For example, in July 2008 Distrigas sold its subsidiary Distrigas & Co. and under the terms of that sale Distrigas is entitled to receive possible additional consideration from the purchasers in accordance with a specified price adjustment mechanism. Given this potential adjustment, Eni agreed to pay additional consideration to Suez for its majority stake in Distrigas in the event that Distrigas receives additional consideration for its sale of Distrigas & Co. within 5 years of that sale. As part of the mandatory tender offer to be made by Eni, Eni will be required to provide tendering shareholders with an equivalent right to additional consideration. Offering a right to deferred contingent consideration as part of a Belgian public offer is innovative, and Slaughter and May worked closely with Eni, Altius and the other advisers to devise a structure in order to enable this mechanism.

The acquisition of the majority stake in Distrigas from Suez, the simultaneous negotiation of a shareholders' agreement with Publigas and the preparations for the tender offer under Belgian law involved solely international work. Eni is an Italian company, Distrigas is a Belgian company, Suez is a Belgian subsidiary of the French group GDF Suez, and all the key agreements were governed by Belgian law.  Working closely with Eni's legal department we helped to manage each aspect of the transaction and led an integrated team of lawyers from Altius (who provided Belgian law advice) and Bonelli Erede Pappalardo (in respect of antitrust and Italian law issues). We also worked with firms in France (Gide Loyrette Nouel), Germany (Gleiss Lutz), Luxembourg (Elvinger, Hoss & Prussen) and the Netherlands (De Brauw Blackstone Westbroek) on regulatory and other matters.

We have achieved a successful outcome for our client. In particular, we helped devise a successful proposal for the acquisition of Suez's majority stake in Distrigas in the context of a highly competitive auction process which took more than nine months to complete, and we continue to help with the preparations for the forthcoming tender offer.