May 10, 2018 / 2:48 PM / 13 days ago

Innogy stalls on E.ON deal with RWE over fairness doubts

FRANKFURT/DUESSELDORF (Reuters) - Innogy (IGY.DE) held off supporting a 4.9 billion euro (4.37 billion pounds) bid by German rival E.ON (EONGn.DE) on Thursday, saying it was not clear if a far-reaching asset swap with its parent RWE (RWEG.DE) was fair for workers or minority shareholders.

FILE PHOTO: A car is plugged in at a Innogy charging point for electric vehicles in Essen, Germany March 12, 2018. REUTERS/Wolfgang Rattay

E.ON and RWE, which holds a 76.8 percent stake in Innogy, revealed plans to break up the networks and renewables business and divide its assets in March.

“Irrespective of the offer price, we are extremely concerned that the job cuts planned by E.ON will be unilaterally pursued to the disadvantage of the Innogy employees,” Innogy Chief Executive Uwe Tigges said.

Although Innogy’s consent is not needed for the deal to proceed, its approval would smooth the process of completing the ambitious plan, which is expected in the second half of 2019.

RWE said it would proceed with the transaction as planned, adding whether Innogy’s minority shareholders accepted the offer or not had no impact on the proposed break-up. E.ON said it would examine Innogy’s reasoning.

Tigges and his counterparts at E.ON and RWE — Johannes Teyssen and Rolf Martin Schmitz — will meet with trade unions on Friday to discuss the deal’s impact on jobs, with labour sources saying that a basic agreement could be reached.

Unions are demanding that the up to 5,000 job cuts E.ON foresees as part of the asset swap be realised without forced layoffs. Teyssen has said he is confident that can be done.

“There has been some movement in the talks with E.ON, especially in the last few days. However, we will measure the success of the negotiations solely by whether Innogy’s employees obtain binding and reliable commitments for a fair integration process,” Innogy’s Tigges said.

    The proposed deal involves a 38.40 euros per share offer from E.ON, amounting to 4.9 billion euros, for the 23.2 percent of Innogy not owned by RWE. Innogy shares are trading at around 36.35 euros.

    “The executive board and the supervisory board regard the price per Innogy share offered by E.ON to be fair in absolute terms,” Innogy said in a statement.

    “However, if the extensive exchange of business activities between E.ON and RWE are taken into consideration, the executive board and the supervisory board are not able to conclusively assess whether the offer price is fair for the minority shareholders,” it added.

    Innogy said it would expand further during its quarterly results call on May 14, when finance chief Bernhard Guenther will address the media for the first time since falling victim to an acid attack in March.

    Under a complex swap, E.ON will take over RWE’s stake in Innogy and keep the unit’s networks and retail activities. RWE will receive E.ON’s and Innogy’s renewable activities.

    In addition, RWE will get a 16.67 percent stake in E.ON, minority stakes held by E.ON in two nuclear plants, Innogy’s gas storage business and a stake Innogy holds in Austrian energy supplier Kelag.

    To offset a valuation gap, RWE will also pay 1.5 billion euros to E.ON in cash.

    Editing by Alexander Smith and Alexandra Hudson

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