E.ON forced to raise bid for Spanish utility

The European Commission, the administrative arm of the European Union, rebuked Spain for blocking cross-border mergers and ordered it to stop trying to thwart E.ON's bid for Endesa. But the disclosure that a Spanish industrial holding company, Acciona, had bought 10 percent of Endesa stirred speculation that the Spanish government was behind the new challenge and that E.ON would have to sweeten its offer. It did just that, raising it 27 percent, to 35 a share. That would value Endesa at 37 billion, or $47 billion, making the deal the world's largest utility merger.

E.ON's chief executive, Wulf Bernotat, called the new offer "exceptionally attractive" and said it "reflects our long-term confidence in Endesa's business model and growth prospects."

Analysts said investors had considered the initial bid too low, adding grist to problems with protectionist sentiments. "After all the talk about Brussels and Zapatero and all the rest, what really decides things is money," said Manuel Romera, a director at the Instituto de Empresa, a business school in Madrid, referring to Prime Minister Jose Luis Rodriguez Zapatero. "If E.ON wants to take control of Endesa, it has to offer enough money."

The economy minister, Pedro Solbes, rejected suggestions that the Acciona move was intended to undermine E.ON's bid. He insisted that the Spanish government was neutral and uninvolved. "These movements happen every day," he said. "There is no reason to make anything more of it."

The EU ordered Spain to withdraw 18 of the 19 conditions on the E.ON offer for Endesa, which would have required selling about 30 percent of Endesa's production capacity. It was allowed to keep a general condition, which could be invoked when the security of Spanish energy supplies was in jeopardy, a European Commission spokesman, Jonathan Todd, said.

The European Union also gave Spain two months to modify its new energy law and said it would go to the European Court of Justice if Madrid missed the deadline.