EON to acquire RWE’s Innogy, upending German energy industry

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 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 businesses 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 deal continues the transformation of competitors RWE and EON started by German Chancellor Angela Merkel’s shift toward an economy powered by renewable energy (RE) 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 write-downs and break themselves up after German wholesale power prices tumbled.

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 (RM192.57) 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.

Germany’s energy shift has already led to a slew of deal-making in the industry. EON 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 RE, 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.

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