EON to acquire RWE’s Innogy, upending German energy industry
London/Frankfurt: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 complex deal involving shares and asset swaps, EON SE will merge with the retail and network businesses of both companies, while RWE will end up owning the combined renewable-generation businesses as well a large stake in EON. The statement came after Bloomberg News reported that the companies were in advanced talks, citing people familiar with the matter. The deal values Innogy at about €22 billion ($27.1 billion).
The deal continues the transformation of competitors RWE and EON started 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 in Germany, the two utility giants were forced to take billions of euros in writedowns and break themselves up after German wholesale power prices tumbled. The German economy and energy ministries declined to immediately comment on the deal.
The agreement sees EON acquiring all of RWE’s 76.8% stake in Innogy, giving RWE 16.7% of EON’s equity in return. EON will also make an offer to Innogy’s minority shareholders that values the company at €40 a share, or about €22 billion in total.
RWE will end up with EON’s minority stakes in two nuclear power plants, Innogy’s gas storage business and Innogy’s stake in an Austrian energy supplier. RWE will make a cash payment to EON of €1.5 billion. The transaction will be enacted in several steps, subject to regulatory and board approvals.
“It’s as if everything they both said about harnessing the energy shift is no longer valid and they’re guided by other more urgent forces,” Arash Roshan Zamir, a utilities and clean energy analyst at Warburg Research, said on the phone on Sunday. “The only thing that’s clear is that they’ve kept it all German. That will be a relief for the unions, the municipal stakeholders and politicians.”
The deal brings together two erstwhile local rivals and marks EON’s return to growth via dealmaking. The company, itself the product of two rivals merging more than a decade ago, is in the process of selling its 47% stake in conventional power utility Uniper SE to Finland’s Fortum Oyj.
Innogy had 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.
EON is Germany’s biggest investor in renewable energy, with more than €10 billion 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 US to Australia.
A deal with EON 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 UK 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.
Shares of Innogy fell 1% in 2017, their first full year on the German stock exchange. They’ve since advanced almost 6%. Bloomberg
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