One of the largest mergers seen in the German energy sector is on the cards. On Sunday, Eon SE announced that it has reached an agreement with RWE AG for the acquisition of its stake in its subsidiary, Innogy.
Currently, RWE holds a 76.8% stake in Innogy. The acquisition would take place as part of a far reaching exchange of business activities and investments, announced Eon. Eon and RWE are still to sign the agreement, which will apply retroactively to January 1, 2018. In addition, the agreement requires RWE to make a cash payment of €1.5 billion to Eon.
Commenting on the agreement, Eon stated that it would grant Eon SE a share ‘expected to be 16.67%’ in respect of the 76.8% stake. For this purpose, new shares are to be issued from existing authorized capital, as part of a 20% capital increase.
RWE is also to receive large parts of Eon’s renewable energy business, and a minority interest in the subsidiary, Preussen Elektra, which is responsible for Eon’s nuclear power plants. RWE will further take over Innogy’s energy and gas storage business, and acquire shares in Austrian energy supplier, Kelag.
The plan, according to Eon, is to make a voluntary takeover in cash for shareholders in Innogy. They will be offered €40 per share – a total value comprised of an offer price of €36.76 per share and a dividend payment of €3.24 per share. RWE is not participating in this offer, said Eon.
The complete transaction is to be implemented over several steps and still requires the approval of Germany’s Federal Cartel Office (Bundeskartellamt).
Once the transaction is completed, Innogy will be fully integrated into the Eon Group, and Eon will become a “customer-focused energy company specialized in energy networks and customer solutions.”
The renewables business of both companies is set to be united under the umbrella of RWE. It remains to be seen how Eon’s PV business will be operated in the future. The commercial and private customer solar business is currently a part of the customer solutions business. Eon is expected to publish further details on this in the coming days.
Other German energy companies have been riled by the news of the planned acquisition. “Here is a mega corporation with great market power. This endangers competition in the electricity market, and could lead to higher electricity prices for consumers in the long term,” read a statement from Lichtblick CEO, Wilfried Gillrath. “The Cartel office must therefore very critically examine this transaction. Lichtblick sees the sales of customer bases of large subsidiaries of energy companies as an opportunity to limit market power.”
The Hamburg-based company also expressed doubt that the acquisition will create a “green” power company. “The result is a group that relies on the recipes of the old energy world,” continues Gillrath, “This is not good news for the energy transition in Germany.”