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EON Is Said to Be in Advanced Talks to Acquire RWE's Innogy

Updated on
  • RWE may retain a minority stake, some Innogy assets in deal
  • A deal could be announced as soon as Monday, people say

EON SE is in advanced talks to acquire RWE AG’s green-energy business Innogy SE, in a deal that would create a German renewables champion as Europe’s biggest economy tries to wean itself off fossil fuels, according to people familiar with the matter.

A deal for Innogy, with a market value of about 19 billion euros ($23.6 billion), could be announced as soon as Monday, said the people, asking not to be identified as the details aren’t public. RWE may retain a minority stake in Innogy as well as some of its renewables assets, the people said. No final decisions have been made and the accord could still fall apart, they said.

Innogy has attracted interest from other European utilities, including Engie SE, Enel SpA and Iberdrola SA, people said. Macquarie Group Ltd. may acquire smaller businesses including in Eastern Europe from the combined entity, they said.

Representatives for EON and RWE couldn’t immediately comment, while officials at Innogy and Macquarie declined to comment. Engie, Enel and Iberdrola couldn’t be immediately reached outside of regular business hours.

Radical Transformation

Domestic competitors RWE and EON have been transformed by German Chancellor Angela Merkel’s shift toward an economy powered by renewable energy instead of nuclear and fossil fuels. Once among the most stable profit contributors among Germany’s biggest companies, the two utilities were forced to take billions of euros in writedowns and a de-facto break up after German wholesale power prices tumbled.

The changing regulatory environment has also led to a slew of dealmaking in the industry. EON is in the process of selling its 47 percent stake in conventional power utility Uniper SE to Finland’s Fortum Oyj.

Buying most of Innogy would redraw the German energy-generation map. E.ON and RWE are both based in the industrial heartland of North Rhine Westphalia and have followed similar paths in the Europe-wide shift away from fossil fuels: the two companies split themselves up in 2016, with EON moving its fossil fuel business into Uniper and RWE put its renewable assets into Innogy via an initial public offering in 2016.

Global Push

E.ON is Germany’s biggest investor in renewable energy, with more than 10 billion euros 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 U.S. to Australia.

A deal with E.ON would come as Innogy is without permanent leadership. Chief Executive Officer Peter Terium left the company in December following a profit warning and trouble in the U.K. business. Uwe Tigges, Innogy’s human resources officer and a management board member, has assumed the CEO role on a temporary basis. Chief Financial Officer Bernhard Guenther became the victim of an acid attack last week and was admitted to the hospital with severe injuries.

Innogy’s full first year on the German stock exchange hasn’t given investors any returns, falling 1 percent in the course of last year. So far in 2018, the stock is up 6 percent. RWE still owns a 76.7 percent stake in Innogy, which is scheduled to report its 2017 earnings on Monday.

— With assistance by Aaron Kirchfeld, Manuel Baigorri, and Brian Parkin

(Updates with details on other bidders from third paragraph.)
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