German energy giant E.ON's counterbid for Endesa has taken a step forward, with the Spanish national energy commission La Comisión Nacional de Energía (CNE) awarding conditional approval for its E26.9bn (£18.17bn) takeover, following government attempts to block the deal.
The CNE has set tough conditions, including the disposal of Endesa's nuclear power plants and power generation capacity in the Balearic and the Canary Islands. Clifford Chance is advising Endesa.
E.ON, advised by Madrid independent Pérez-Llorca, has been quick to criticise the ruling as unjustified.
The government had pinned its hopes on the CNE deciding that the security of Spain's gas supplies and operation of Endesa's nuclear power stations could not be guaranteed under foreign ownership.
Just three days after E.ON launched its bid, the government gave the CNE new powers to deny foreign takeover bids when strategic energy supplies were at risk.
The European Commission has reacted swiftly to the CNE's conclusions. Two strongly worded letters have made it quite clear that the Commission believes Spain has violated merger regulations.
The decision by the CNE, though, has calmed the nerves of investors. Like many, Ashurst Madrid managing partner Steven Fox believes that a negative decision by the CNE could have had serious repercussions for investment in Spain, including M&A.
"This albeit convoluted decision to allow the E.ON-Endesa deal will be met by a collective sigh of relief that the continued confidence being shown in the market is justified," says Fox.