12.03.2018 Joint Press Release
E.ON and RWE agreed today that RWE will transfer its entire stake of 76.8 percent in innogy to E.ON via a far-reaching exchange of assets and businesses.
The transaction will create two stronger European energy companies headquartered in Essen, Germany. As a leading company, the newly created E.ON will have a clear focus on intelligent networks and customer solutions, ideally positioned to become an innovative force behind the energy transition in Europe. RWE will become a broadly diversified power producer optimally complementing a large portfolio of renewables assets with its conventional energy generation and linking the two with its existing trading platform. This set-up will enable RWE to generate sustainable, profitable growth.
The transaction brings together the strengths of both previously vertically integrated German energy utilities by enabling a focus on networks and customer solutions on the one hand, and on a fully diversified generation business on the other.
In detail, it was agreed that RWE will sell its 76.8 percent participation in innogy to E.ON for: (I) a resulting shareholding in E.ON of 16.67 percent from authorised capital as part of a non-cash capital increase by E.ON; (II) substantially all of E.ON’s renewables activities; (III) innogy’s renewables business; (IV) the minority stakes currently held by E.ON’s subsidiary PreussenElektra in the RWE-operated power plants Emsland and Gundremmingen, and (V) innogy’s gas storage assets and its participation in the Austrian energy utility Kelag. Additionally, the transaction agreement provides for a payment from RWE to E.ON of €1.5 billion. The transaction values RWE’s 76.8 percent stake in innogy at €40.00 per share, including the assumed dividends of innogy SE for the fiscal years 2017 and 2018 of a total of €3.24 per share to which RWE will remain entitled.
E.ON will also make a voluntary public takeover offer in cash to the current minority shareholders of innogy. This offer will provide innogy shareholders with a total value of €40.00 per share as of today, which represents a premium of 28 percent to innogy’s last share price unaffected by media speculation on 22 February 2018, and a 23 percent premium to the three-month volume-weighted average trading price (VWAP). The total value consists of an offer price of €36.76 per share plus the payment of a total of €3.24 per share for the fiscal years 2017 and 2018 from assumed dividends of innogy SE, which the current shareholders will still receive. If the takeover offer completes prior to the date on which innogy’s Annual General Meeting resolves on the dividend for the fiscal year 2018, E.ON will increase the offer price such that the total value of €40.00 per share remains unchanged for the shareholders of innogy.
E.ON to become a game changer in the decentralised energy world
The new E.ON will be the first formerly integrated European energy company to focus entirely on meeting the demands of its around 50 million customers across Europe, with intelligent networks and innovative customer solutions at its heart.
Johannes Teyssen, CEO of E.ON: “This strategic exchange of businesses will create two highly focused companies that will shape a better future for Europe’s energy landscape. Each company will have a stronger entrepreneurial core. Bringing together E.ON’s and innogy’s activities in the fields of networks and customer solutions will allow E.ON to enhance its strong offering along the part of the energy value chain that is closest to the customer. The new E.ON will be able to intensify its efforts towards climate protection, for example through the faster roll-out of charging networks for e-mobility or the advancement and extension of smart grids in Europe. In turn, our renewables platform will become part of a stronger joint entity within RWE.”
RWE to become one of the European leaders for renewable energy and security of supply
After the integration of E.ON’s and innogy’s renewables businesses, RWE will run CO2-free generation capacity amounting to approximately 8 Gigawatt (GW) from offshore and onshore wind as well as hydro and photovoltaics. RWE will thereby become number three in Europe in the renewable energy business as a whole, and number two in wind power. This opens up attractive growth prospects, with a concrete project pipeline in Europe and the US. The combination of renewable and conventional power generation will allow the company to help actively and responsibly transform and reshape energy systems in support of ambitious climate protection targets.
Rolf Martin Schmitz, CEO of RWE: “Renewable and conventional energy generation are two sides of the same coin when it comes to the transformation of the energy world. The expansion of CO2-free electricity generation will increasingly evolve from a regulated sector to a normal competitive market. Significant size is crucial for success in this future-orientated business. At the same time, security of supply remains the beating heart of any future-proofed industrial society. Our trading platform links and seamlessly brings to market all energy assets in our portfolio. The combination of these businesses, together with our solid financial situation allowing for growth investments, make RWE a strong partner of the energy transition – beyond the borders of Germany. The core business of the company and our solid financial stake in E.ON create attractive, sustainable prospects for our company, our employees and our shareholders.”
Significant value creation for all stakeholders
E.ON and RWE will be strategically well positioned after this transaction. Both companies are convinced that their positions in their respective core businesses can be further strengthened. Their solid financial foundations will provide a basis for sustainable profit growth and attractive dividends in the long term.
Bolstered by the high earnings quality of its regulated business post transaction, E.ON’s executive board reiterates its intention to maintain a strong BBB rating. RWE will be able to underpin its investment-grade rating based on additional stable cash flows from its renewables business.
E.ON’s straightforward corporate structure will facilitate innogy’s integration. E.ON expects significant synergies amounting to €600 to €800 million annually by 2022. Initial calculations show that the integration process will lead to a reduction of a maximum of 5,000 jobs of the then significantly more than 70,000 jobs at the enlarged E.ON. This equates to less than 7 percent. At the same time, E.ON anticipates to create thousands of new jobs in the coming decade.
The two renewables businesses of more than 2,500 employees will be brought together within the RWE group alongside RWE’s existing segments. The stake in regional utility Kelag, with extensive hydropower activities, will fit in excellently with the company’s new focus on renewable energy. Gas storage, which will remain unbundled, will complement RWE’s gas activities and will be assigned to the Supply & Trading segment. Overall, RWE does not expect any staff reductions in the coming years as a result of the transaction.
Both companies pledge that any integration measures will be carried out based on long established partnerships with the representatives of the works councils and trade unions.
Structural change is always associated with uncertainty for affected employees. E.ON and RWE are convinced that, by combining forces, each of the business areas that are touched by this transaction will have better prospects than before.
Two strong companies with clear focal points and growth prospects will offer an environment in which employees can develop further. E.ON and RWE will be well equipped to face the future challenges of the energy transition. Both have every intention, together with their customers, partners and employees, to shape the energy world of tomorrow and to make a substantial contribution to achieving climate protection targets.
Transaction expected to close by the end of 2019
Until the transaction completes, E.ON, RWE and innogy remain separate businesses and competitors. The voluntary public takeover offer period is currently expected to commence in early May 2018, following approval of the offer document by BaFin (the German Federal Financial Supervisory Authority, Bundesanstalt für Finanzdienstleistungsaufsicht). Closing of both, the asset exchanges between E.ON and RWE, and the PTO, is subject to approval by the relevant antitrust and regulatory authorities. Closing of the PTO is expected by the middle of 2019. The transfer of the renewable energy business from E.ON and innogy to RWE is to take place as soon as possible thereafter and could be completed by the end of 2019.
E.ON’s financial advisors are Perella Weinberg Partners and BNP Paribas, Linklaters acts as legal counsel for E.ON.
BoFA Merrill Lynch and Citigroup act as financial advisors to RWE in this transaction. Rothschild provided a fairness opinion to RWE’s Supervisory Board. Freshfields Bruckhaus Deringer act as legal counsel.
Important notice of E.ON SE:
This announcement is neither an offer to purchase nor a solicitation of an offer to sell shares in innogy SE (“innogy Shares”). The final terms and further provisions regarding the takeover offer by E.ON Verwaltungs SE to the shareholders of innogy SE (the “Takeover Offer”) will be set forth in the offer document which will be published upon approval of its publication by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). Investors and innogy Shareholders are strongly recommended to read the offer document and all announcements and documents published in connection with the Takeover Offer, since they will contain important information.
To the extent permissible under applicable law or regulation, and in accordance with German market practice, E.ON Verwaltungs SE or brokers acting on its behalf may from time to time make certain purchases of, or arrangements to purchase, directly or indirectly, innogy Shares or any securities that are immediately convertible into, exchangeable for, or exercisable for, innogy Shares, other than pursuant to the Takeover Offer, before, during or after the period in which the offer remains open for acceptance. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any information about such purchases will be disclosed as required by law or regulation in Germany or other relevant jurisdictions.
This announcement may contain statements about E.ON Group or innogy that are or may be “forward-looking statements”. Forward-looking statements include, without limitation, statements that typically contain words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “believe”, “hope”, “aims”, “continue”, “will”, “may”, “should”, “would”, “could”, or other words of similar meaning. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. E.ON Group cautions you that forward-looking statements are not guarantees of the occurrence of such future events or of future performance and that in particular the actual results of operations, financial condition and liquidity, the development of the industry in which E.ON Group and innogy operate and the outcome or impact of the proposed acquisition on E.ON Group and/or innogy may differ materially from those made in or suggested by the forward-looking statements contained in this announcement. Any forward-looking statements speak only as at the date of this announcement. Except as required by applicable law, E.ON Group does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
RWE Disclaimer: Forward-looking statements
This press release contains forward-looking statements. The statements reflect the current assessments, expectations and assumptions of the management and are based on the information available to the management at the current time. Forward-looking statements provide no assurance that future events or developments will occur and are subject to known and unknown risks and uncertainties. As a result of various factors, actual future events and developments may differ materially from the expectations and assumptions expressed in this publication. In particular, these factors include changes in the general economic environment and the competitive situation. Above and beyond this, developments on the financial markets, fluctuations in exchange rates, changes to national and international law, especially with regard to tax regulations, and other factors can influence the future results and performance of the Company. Neither the Company nor any of its associated companies undertake to update the statements contained in this press release.