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The Rumour Has It

04 July 2017 by lberuti

When they came in the office this morning, European investors were not expecting any excitement. And that is exactly what they got for the most part. There were pockets of activity though. One related to rumours of a merger between GASSM ( Gas Natural SDG SA ) and ELEPOR ( EDP - Energias De Portugal SA ). According to press reports, the Spanish power and gas distributor would have approached its Portuguese rival with a view to form the fourth-biggest utility by market value. Recently, the market has been rife with consolidation rumours in the sector. Just a few months ago, ELEPOR was said to be exploring a sale of Naturgas, its Spanish gas distributor. Even if ELEPOR rebuffed the merger talks, investors appeared to give some credit to the story, and the risk premia of the two companies compressed. While ELEPOR’s 5-year CDS traded 14bps tighter at 102bps, GASSM’s traded 3.5bps wider at 60.5bps. They were respectively the best and worst performers of the day among utilities