French state-controlled energy giant, EDF launched a £12.5 billion agreed bid for British Energy this morning, nudging it closer to a widely expected takeover of the bulk of Britain’s nuclear industry.

The company said the board of British Energy had agreed to recommend an offer at 774p per share, or 700p plus a nuclear power note linked to to the future performance of the generating company, which produces over 15 per cent of UK electricity.

EDF’s board met last night to finalise details of the offer, which is only a slight improvement on the 765p per share bid that was torpedoed in July by two rebel shareholders, Invesco Perpetual and M&G.

Traders reported today that Merrill Lynch, on behalf of EDF, was offering to buy 260 million British Energy shares - roughly a third of the company - at 774p. By lunchtime, 37 million shares had been traded in the public market and the share price had risen to 773.5p, up 49.5p.

Invesco, which owns 9.5 per cent of the shares, has now thrown its weight behind the deal. It will also be welcomed by the British Government, which will gain around £4 billion from the sale of its 35 per cent stake in the group.

But it was unclear whether the new terms will be sufficient to persuade M&G, which owns 5 per cent of the shares.

British Energy said that "the majority of shareholders will find this attractive" but acknowleged that there was one which remained firmly opposed. M&G could not be reached for comment

EDF is set to make a full announcement in Paris today.

Bill Coley, the chief executive, said a takeover by EDF would represent "a transformational opportunity" for both companies.

He said that EDF would be obliged to sell certain nuclear sites to other operators to ensure sufficient competition in the UK energy market.

“We are delighted that the British Energy board has unanimously accepted this offer,” said Pierre Gadonneix, chairman of EDF. “This paves the way for investment in the UK.”

Prime Minister Gordon Brown also welcomed the deal.

“This deal is good value for the taxpayer and a significant step towards the construction of a new generation of nuclear stations to power the country," he said. "Nuclear is clean, secure and affordable; its expansion is crucial for Britain’s long term energy security, as we reduce our oil dependence and move towards a low carbon future.”

John Hutton, the Business Secretary, said: “Nuclear has the clear potential to play a central role in giving our country a diverse energy mix. It will be indispensable for our long term energy security.

British Energy owns eight nuclear plants, including Sizewell, Heysham, Torness and Dungeness, and one coal-fired power station at Eggborough in Yorkshire.

EDF, which is over 80 per cent owned by the French state, wants to use them as a bridgehead to build four new French-designed nuclear power stations in the UK using technology from Areva.

As part of the deal, EDF is likely to spin off two of the sites to rival operators, probably at Bradwell and Dungeness.

Centrica, the owner of British Gas, is also expected to acquire a 25 per cent stake in British Energy at a later date.

“While discussions are at an early stage, the deal would be good for British Gas’ customers and our shareholders because it would, over time, reduce our risk and exposure to volatile wholesale gas and electricity prices," said chief executive Sam Laidlaw.

"The opportunity to invest in new nuclear build alongside EDF, the world’s leading nuclear operator, would form a core part of our generation portfolio and an important new growth platform for the long term", he said.

A deal between EDF and British Energy was almost announced at the end of July but last-minute wrangling over price by Invesco Perpetual and M&G stalled negotiations.

The UK Government views the sale of the company as the centrepiece of its effort to drive through a renaissance of nuclear power in the UK.

EDF, the world’s largest operator of nuclear power stations, was the only serious bidder to submit a full offer for British Energy ahead of a May deadline.

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