* Gaz to offer $35.25 a share vs Fortis' $35.10 a share bid
* Gaz sees deal add to EPS, cash flow in first full yr
* CVPS shares up 4 pct on investor hopes of better offer (Adds conf call details, analyst comments, background, share mvt)
By Gowri Jayakumar
June 23 (Reuters) - Canada's Gaz Métro LP offered to buy Central Vermont Public Service Corp for about $472 million -- a slim premium to Fortis Inc's bid -- but investors bid up the Vermont utility company's shares on hopes of a better proposal.
Shares of Central Vermont (CVPS) rose about 4 percent to $35.64 in mid-day trade, above Gaz's offer of $35.25 a share. The offer is about 2.4 percent more than CVPS' closing price on Wednesday, and just 15 cents higher than Fortis' bid.
"Obviously, the premium on Fortis is nothing crazy, but it is higher than the previous bid," said Pierre Lacroix, an analyst with Desjardins Securities.
Quebec-based Gaz, which has been serving the Vermont market for about 25 years, is looking to build its presence in the northeastern U.S. state as its largest electricity distributor.
The company expects the deal to add to earnings per share and cash flow in the first full year of acquisition, it said in a conference call with clients.
CVPS, which is getting a premium of about $2 million with the Gaz Metro offer, will have to pay Fortis a break-up fee of about $17.5 million, if the new deal falls through.
"Maybe the break fee is something that one wonders about, but in the long term, since Gaz has many more synergies with CVPS and the regulatory system in Vermont, the company is probably better off with Gaz," Lacroix added.
Gaz, which is partly owned by Valener Inc , said there would be no layoffs, other than a limited number of executive positions, at CVPS.
The company, which hired BMO Capital Markets as its financial adviser, said it had secured the financing required for the deal.
Both Gaz and Fortis have agreed to assume $230 million of CVPS debt.
Newfoundland and Labrador-based Fortis, which has a market cap of over $6.29 billion, was looking to enter the U.S. utility market with the CVPS buy.
Fortis is the largest investor-owned distribution utility in Canada and its regulated holdings include electric utilities in five Canadian provinces and three Caribbean countries. (Reporting by Gowri Jayakumar in Bangalore; Editing by Gopakumar Warrier, Saumyadeb Chakrabarty)