E.ON yesterday confirmed it has reached an agreement in principle to acquire rival RWE’s stake in renewables specialist Innogy in a deal worth an estimated €43bn that is set to reshape the European energy market.
The German energy giants confirmed an agreement has been reached, subject to board approval, after reports over the weekend revealed a complex cash, shares, and assets deal was under negotiation.
Share in Innogy, RWE, and E.ON all surged this morning as the markets responded positively to the news.
Under the agreement in principle, E.ON would acquire RWE’s 76.8 per cent stake in Innogy, but at the same time most of E.ON and Innogy’s renewables business, minority stakes in two nuclear power plants, and Innogy’s gas storage business, as well as some other assets, would be transferred back to RWE.
The deal would result in RWE holding a 16.67 per cent stake in E.ON. It would leave E.ON operating primarily as an energy networks and retail specialist, with RWE significantly strengthening its position in the renewables and clean energy generation markets.
“After successful implementation of the transaction it is intended to fully integrate innogy into the E.ON Group,” E.ON said in a statement. “Through this transaction E.ON would become a focused customer-oriented energy company concentrating on energy networks and customer solutions. The renewables businesses of E.ON and RWE would be brought together under the umbrella of RWE.”
The move is the latest shake out in the German energy market to result from the country’s ambitious shift towards renewables, known as the energiewende. In recent years both RWE and E.ON have sought to split their operations into forward-facing business units focused on renewables and smart grids and legacy operations holding the bulk of their fossil fuel assets.
Recent financial results have suggested the re-organisation is starting to pay off for both companies, with E.ON agreeing in January to sell a minority stake in its fossil fuel business Uniper to Finland’s Fortum for €3.8bn in January.
The deal, which will be subject to regulatory approval, comes amidst a challenging time for Innogy. Chief executive Peter Terium resigned late last year in the wake of a profit warning leaving Uwe Tigges as interim CEO. Meanwhile, in a shocking development chief financial officer Bernhard Günther was reportedly subject of an acid attack by unknown assailants that has left him severely injured and currently receiving treatment in hospital.