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Innogy boards cautious about E.on bid

Zuidwester wind farm. Image by innogy.com.

May 11 (Renewables Now) - The executive board and the supervisory board of German renewables-focused utility Innogy SE (ETR:IGY) have both decided not to issue, at this point, any recommendation in relation to the recently launched voluntary public takeover offer by E.on SE (ETR:EOAN).

The two boards have determined that the offered price of EUR 40.00 (USD 47.6) per share, including dividend payments for fiscal 2017 and 2018, seems to be fair in absolute terms. They, however, were unable to definitively assess the relative value of the bid in view of the extensive exchange of business activities planned by the suitor and Innogy’s majority owner -- RWE AG (ETR:RWE).

The two German energy majors agreed in March a complex transaction that includes E.on’s planned purchase of RWE’s 76.79% stake in Innogy, as well as RWE’s acquisition of E.on’s major renewable energy operations and Innogy’s own renewables business. At the same time, RWE will get a 16.67% minority stake in E.on.

E.on launched a bid for the remaining minority stake in Innogy in late April, offering EUR 38.40 apiece, excluding a dividend of EUR 1.60 a share for fiscal year 2017 and assuming a distribution of EUR 1.64 apiece for fiscal 2018. The acceptance period will end at midnight (CEST) on July 6, 2018.

“Due to private agreements between E.on and RWE, we aren’t able to conclusively assess whether the offer price altogether is fair,” said Uwe Tigges, CEO of Innogy.

The executive and supervisory boards of Innogy are also concerned about the company’s employees, as job cuts planned by the suitor may be unilaterally pursued to the disadvantage of Innogy staff, Tigges further commented. The uncertainty surrounding the future of Innogy employees could be an even bigger problem given the fact that the transaction is not expected to close until the end of 2019. The boards fear that qualified employees may leave the company in the time period. Thus, the boards want additional safeguards in favour of the company’s employees.

Innogy noted that it has held talks with both E.on and RWE in a drive to conclude a balanced framework agreement, and that discussions have continued in the past few days, but no legally-binding deal has been signed yet.

The target also mentioned that E.on has not been willing so far to commit to retaining Innogy as a retail and partner brand.

(EUR 1.0 = USD 1.190)

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Ivan is the mergers and acquisitions expert in Renewables Now with a passion for big deals and ambitious capacity plans.

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