Utility RWE (RWEG.DE) said on Sunday it had agreed to sell its 76.8 percent stake in Innogy (IGY.DE) to rival E.ON (EONGn.DE), as part of a complex deal that would position RWE as a clean energy champion.
The multi-stage deal to sell Innogy, a network, renewable and retail energy utility with a market value of 19 billion euros ($23.4 billion), would also result in RWE – Germany’s biggest electricity producer – owning a minority stake in E.ON.
Chancellor Angela Merkel’s decision to phase out nuclear power after Japan’s Fukushima nuclear disaster of 2011, and her government’s focus on raising ‘clean’ energy output have pressured profits and forced utilities to radically restructure in order to remain viable.
Through the takeover, which includes shares and asset swaps, E.ON will focus its business on regulated energy networks and customer service, while RWE will take on the renewables businesses of both E.ON and Innogy.
The deal would be implemented in several steps, both companies said, adding that it required the approval of their boards, and of anti-trust and regulatory authorities.
Official and industry sources expect the deal to undergo scrutiny by European Union regulators as well as from Germany’s Federal Cartel Office, which did not immediately respond to an emailed request for comment.
Innogy, a network, renewable and retail energy utility, has been in turmoil since Chief Executive Peter Terium resigned in December and Chief Financial Officer Bernhard Guenther fell victim to a recent acid attack.
It has also has been the target of persistent takeover speculation, with sources saying recently that RWE had talked to France’s Engie (ENGIE.PA) and Italy’s Enel (ENEI.MI) about a possible asset-swap deal.
Other firms linked to Innogy included Spain’s Iberdrola (IBE.MC) and Australian bank Macquarie (MQG.AX), an acquisitive infrastructure investor. Innogy reports its annual results on Monday, while RWE does so on Tuesday and E.ON on Wednesday. The supervisory boards of both RWE and E.ON will meet on Sunday to review the deal, according to people familiar with the matter.
E.ON would make a voluntary cash takeover for RWE’s Innogy stake valued at 40.00 euros per share, E.ON said in a filing issued in the early hours of Sunday. Innogy shares closed at 34.53 euros on Friday.
This price includes an offer of 36.76 euros per share plus assumed dividends of Innogy SE for the fiscal years 2017 and 2018 in the total aggregate amount of 3.24 euros per share, E.ON said. RWE will not participate in the offer.
As part of the deal, E.ON would undertake a 20 percent capital increase so that RWE can buy a 16.67 stake in E.ON. E.ON will issue shares from authorized capital while RWE will make a cash payment to E.ON of 1.5 billion euros, E.ON said.
E.ON also agreed to transfer most of its renewables business to RWE, including minority interests currently held by E.ON’s subsidiary PreussenElektra in the RWE-operated nuclear power plants Emsland and Gundremmingen.
RWE in turn, will receive Innogy’s renewables and gas storage business as well as Innogy’s stake in Austrian energy supplier Kelag, E.ON said.
The intricate deal structure apparently seeks to address competition concerns by minimizing operational overlaps, with RWE gathering up renewables assets while parting with Innogy’s network and retail operations.
That would position RWE as a champion of Germany’s so-called ‘Energiewende’ – the transition away from fossil fuels that have been blamed for causing climate change, towards a more sustainable mix of energy sources.