Three becomes two

12 March 2018 By Peter Thal Larsen Follow @Peter_TL

RWE is splitting its ailing Innogy unit in a 22 bln euro deal with rival E.ON. The former will focus on generating power, while the latter specialises in distribution. A knotty asset swap obscures the value picture. But the plan enjoys stronger logic than previous reshuffles.

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RWE said on March 11 it had struck a deal to carve up its Innogy subsidiary in a deal with rival E.ON.

As part of the deal, RWE will sell its 76.8 percent stake in Innogy to E.ON. The unit will be valued at 40 euros a share, inclusive of dividends of 3.24 euros a share that the company is expected to pay in 2018 and 2019.

E.ON will then make an offer to Innogy’s remaining shareholders at the same price. After the deal, RWE will have a 16.7 percent stake in E.ON. The deal values Innogy’s equity at 22.2 billion euros.

In return, RWE will receive assets including E.ON’s renewable energy businesses, Innogy’s renewable energy businesses, and Innogy’s share in Austrian utility Kelag. RWE will also receive E.ON’s minority stakes in nuclear power plants operated by its rival. RWE will pay Innogy 1.5 billion euros in cash as part of the deal.

Innogy on March 12 announced that it would cut costs by a further 400 million euros through the end of 2020. The company reported net profit for 2017 of 908 million euros, down from 1.6 billion euros in the previous year.

Innogy shares were up 13 percent at 39.2 euros by 0900 GMT on March 12. RWE shares were up 7.9 percent at 19.4 euros. E.ON shares were up 5.6 percent at 8.92 euros.

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