( AFP ) - French energy group Suez and state-owned Gaz de France announced their merger Monday, creating the world's fourth biggest energy company by market capitalisation.
The state will retain more than 35 percent in the new GDF-Suez, which will be Europe's biggest energy company behind Russia's Gazprom, France's Electricite de France and Germany's EON, the companies said in a statement.
The boards of the two groups approved the merger on Sunday, finalising intense negotiations that began in February 2006 and had to overcome union hostility to a reduction of the state's holding in GDF.
An increasing discrepancy between the two companies' market valuation was another sticking point which dogged the talks, requiring the intervention of President Nicolas Sarkozy.
Suez shares have risen faster than GDF's over the past 18 months, meaning that a merger on the initially agreed terms would leave Suez shareholders short-changed.
Sarkozy gave the green light Thursday to the deal provided Suez sell off part of its business, resolving the issue of market valuation and handing the French state a higher stake in the merged group.
Under the deal, Suez's water and other non-energy businesses will be carved off into a separate unit 35 percent owned by GDF-Suez and 13 percent by public shareholders, a source close to the talks said Sunday.
The remainder was set to be sold on the stock market.
Suez managing director Gerard Mestrallet would take the helm of the new group, the companies announced. He would "manage in tandem" with GDF chief Jean-Francois Cirelli, who would be vice-president.
The formal announcement was made before the Paris stock exchange opened at 9:00 am (0700 GMT). The merger, which must still be approved by shareholders, will be finalised by the middle of next year.
Unions and the left-wing opposition accuse Sarkozy of backtracking on a pledge he made as finance minister in 2004 not to privatise GDF. France biggest union, the CGT, argues the merger amounts to a privatisation.
Shares in both companies rose on the Paris stock exchange on Friday amid expectation of a merger announcement. Suez shares jumped 1.80 percent to 41.90 euros while GDF shares climbed 3.95 percent to 36.80 euros.