Monday , March 12, 2018 - 3:20 PM
(c) 2018, Bloomberg.
EON SE will shed as many as 5,000 jobs in the deal to take over Innogy SE, a move that marks the biggest shakeup in Germany’s energy business in years.
The transaction agreed with its rival RWE AG values Innogy at $27.1 billion (22 billion euros) and will sharpen the focus of Germany’s leading two electricity and natural gas providers, according to a joint statement from the two on Monday. EON billed itself as the first formerly-integrated utility to focus entirely on meeting needs of 50 million customers across Europe. RWE said it doesn’t expect any net job losses.
EON’s target is to make savings of 600 million euros to 800 million euros for by 2022. It would become a grid manager and power provider focused on meeting Chancellor Angela Merkel’s ambitious targets to cut pollution. For RWE, which is Europe’s biggest generator of electricity, the deal would return it to the renewables as an alternative to its current generation network that now is focused mainly on coal and nuclear power.
“This strategic exchange of businesses will create two highly focused companies,” EON Chief Executive Officer Johannes Teyssen said in a statement. RWE CEO Rolf Martin Schmitz said, “size is crucial” to exploit business opportunities as clean energy subsidies disappear and that conventional power assets will become “the beating heart of any future-proofed industrial society.”
Merkel is seeking to phase out of coal-fired power generation in Germany and wants to deliver a plan by the end of this year. RWE owns half of the nation’s coal-fired power capacity.
“The new RWE and EON entities provide investors with clearer differentiated opportunities,” Jonas Rooze, an analyst at Bloomberg New Energy Finance, wrote in a note to clients. “Investors can take stakes in RWE if they want power generation exposure, and in EONfor distribution and retail exposure.”
EON’s voluntary takeover offer for Innogy will probably be completed by the middle of 2019, the companies said. RWE may take control of EON’s renewable energy assets by the end of 2019, when the full transaction is due to close subject to approval from antitrust authorities.
Perella Weinberg Partners and BNP Paribas advised EON, with Linklaters acting as legal council. BofA Merrill Lynch and Citigroup advised RWE, and Rothschild provided a fairness opinion to RWE’s supervisory board and Freshfields Bruckhaus Deringer acting as legal council.
RWE will end up with EON’s renewables business, minority stakes in two nuclear power plants, Innogy’s gas storage business and a stake in an Austrian energy supplier. Including the asset swaps, the whole transaction has an enterprise value of about 60 billion euros.
EON also released earnings for 2017 that beat analysts forecasts, bringing forward its announcement by two days. Bloomberg News first reported the deal on March 10, with confirmation from the companies on Sunday and a full statement with terms of the transaction released on Monday evening. RWE reports earnings on Tuesday.
EON said its adjusted net income was 1.5 billion euros last year, above the median forecast collected by Bloomberg for of 1.33 billion euros.
--With assistance from Chad Thomas
Sign up for e-mail news updates.