EON Agrees to Buy RWE's Innogy, Upending German Utility Industry - Bloomberg

EON Agrees to Buy RWE's Innogy, Upending German Utility Industry

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March 11, 2018, 7:16 PM GMT+11

RWE will emerge owning minority stake in enlarged EON

Deal sees RWE taking both Innogy and EON’s renewable assets

Headquarters of Eon in Essen. Photographer: Patrik Stolarz/AFP via Getty Images

EON SE agreed to acquire Innogy SE from German rival RWE AG, transforming the energy industry as Europe’s largest economy continues its switch to renewable power.

In a complicated deal involving shares and asset swaps, EON SE will emerge with the retail and network businesses of both companies, while RWE will end up owning the combined renewable generation as well a large stake in EON. The statement came after Bloomberg News reported that they were in advanced talks, citing people familiar with the matter.

The agreement sees EON acquiring all of RWE’s 76.8 percent stake in Innogy, giving RWE 16.7 percent of EON’s equity in return. EON will also make an offer to Innogy’s minority shareholders that values the company at 40 euros ($49.22) a share, or about 22 billion euros in total.

Domestic competitors RWE and EON have been transformed by German Chancellor Angela Merkel’s shift toward an economy powered by renewable energy instead of nuclear and fossil fuels. Once among the most stable profit contributors among Germany’s biggest companies, the two utilities were forced to take billions of euros in writedowns and a de-facto break up after German wholesale power prices tumbled.

The changing regulatory environment has also led to a slew of dealmaking in the industry. EON is in the process of selling its 47 percent stake in conventional power utility Uniper SE to Finland’s Fortum Oyj.

Innogy has attracted interest from other European utilities, including Engie SE, Enel SpA and Iberdrola SA, the people said. Macquarie Group Ltd. may acquire smaller businesses including in Eastern Europe from the combined entity, they said.

Engie, Enel and Iberdrola couldn’t be immediately reached outside of regular business hours. Macquarie declined to comment

E.ON is Germany’s biggest investor in renewable energy, with more than 10 billion euros in wind solar and storage, while RWE is the country’s biggest power producer, though with a heavy focus on conventional sources. Innogy has sought to broaden its global footprint, with wind and solar assets that stretch from the U.S. to Australia.

A deal with E.ON would come as Innogy is without permanent leadership. Chief Executive Officer Peter Terium left the company in December following a profit warning and trouble in the U.K. business. Uwe Tigges, Innogy’s human resources officer and a management board member, has assumed the CEO role on a temporary basis. Chief Financial Officer Bernhard Guenther became the victim of an acid attack last week and was admitted to the hospital with severe injuries.

Innogy’s full first year on the German stock exchange hasn’t given investors any returns, falling 1 percent in the course of last year. So far in 2018, the stock is up 6 percent.

— With assistance by Brian Parkin, Ed Hammond, and Dinesh Nair