Innogy asset swap deal could boost competitiveness- German minister

Eon signals jobs cull image

German energy giant E.ON is planning to take over Innogy, the renewables subsidiary of domestic competitor RWE.

RWE and E.ON posted the second and third biggest gains, rising 9.2 percent and 5.3 percent respectively.

RWE had been in talks with European peers including Engie ENGIE.PA and Enel ENEI.MI over the past year on a potential transaction and was even close to reaching a deal with Iberdrola IBE.MC in late 2017, the sources said.

RWE and E.ON are making these massive reorganizations faced with the rise of wind and solar power in Germany and across Europe, which has undercut the markets and profits for fossil fuels and nuclear power plants.

Once the Eon-RWE deal, announced on Sunday (11 March), has gone through, Eon plans to integrate Innogy into its existing business. RWE will pay another 1.5 billion euros to E.ON to close a valuation gap that results from the complex structure of the asset swaps.

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Boards of both companies still need to approve the transaction.

Germany's cartel office said it was too early to comment on possible hurdles in the planned asset swap deal, which is expected to involve German and European antitrust regulators.

Innogy and E.ON have large overlapping retail businesses in Germany and Britain. RWE kept 76.8 percent of Innogy after the 2016 carve-out. "Through this transaction E.ON would become a focused customer-oriented energy company concentrating on energy networks and customer solutions".

German business daily Handelsblatt said "for decades E.ON and RWE were bitter rivals; now they agreed on a spectacular deal that will shake up the European energy market".

While the two companies were in touch with each other over the last year, concrete negotiations about Innogy only picked up this year, the sources said. It has been in turmoil since former Chief Executive Peter Terium resigned in December and on Monday said it would cut 400 million euros in costs through the end of 2020. Today it reported 2017 results, saying its adjusted net profit grew by 9% to more than Euro 1.22 billion.

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