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E.ON sees job cuts, synergies in German utilities shake-up

Reuters  |  ESSEN, Germany 

By Christoph and Tom Käckenhoff

ESSEN, (Reuters) - German firm said on Monday it expects as many as 5,000 job cuts and up to 800 million euros ($987 million) of synergies as part of an asset swap with peer RWE involving its renewables and network arm .

Plans to break up and divide its assets between parent RWE and E.ON, first announced a day earlier, added 4.3 billion euros to the market value of Germany's three largest utilities in the sector's largest overhaul in recent history.

Germany's power companies are reshaping as they look to boost green output, shift away from fossil fuels and prepare for Germany's exit from nuclear power in 2022.

"This strategic exchange of businesses will create two highly focused companies that will shape a better future for Europe's landscape," said in a statement.

"Each company will have a stronger entrepreneurial core."

The changes will turn RWE into Europe's third-largest and at the same time create one of the continent's top grid and retail groups under the aegis of E.ON, with about 50 million customers across the continent.

"Overall, we view the planned transaction between and SE as positive, from a strategic as well as a financial point of view," municipal shareholders in RWE, which together hold about 23 percent in the group, said.

"We think that this transaction gives significant thrust to the successful implementation of Germany's shift."


Before striking a deal with E.ON, RWE held talks with European peers and and came close to a deal with Spain's before Christmas, people familiar with the matter said.

Shares in closed up 12.1 percent at 38.70 euros after Sunday's proposed deal from RWE and E.ON, which plans to offer Innogy's minority shareholders 40 euros per share, or 5.2 billion euros, a 16 percent premium to Friday's close.

Two bankers who have worked on previous deals put the chances of a rival bid for the German company as "very low" to "zero", since RWE has already explored alternative deals with other candidates.

RWE is being advised by Lynch and on the deal, has hired and BNP. is working for Innogy, sources said. The deal is expected to close in late 2019.

In a letter to staff seen by Reuters, interim said Innogy's management and supervisory boards would thoroughly assess the planned deal, which was agreed in principle and still requires antitrust approval.

"We assure you that the interests of the employees of our company as well as those of our shareholders continue to be our primary focus," said Tigges, who has been in the role for only three months.

Innogy, which reported its annual results on Monday, said that it had so far not reflected on the proposal and would comment at a later stage.


Frank Bsirske, of the Verdi labour of supervisory board, welcomed the deal, saying it offered good prospects for growth and jobs. The supervisory boards of both RWE and have approved the transaction.

Germany's cartel office said it was too early to comment on possible hurdles in the planned asset swap deal, which is expected to involve German and European antitrust regulators.

and have large overlapping in Germany, Britain and the said it expects 600-800 million euros in annual synergies by 2022.

Shares in RWE, which owns 76.8 percent of Innogy, closed 9.2 percent higher while E.ON's ended the day up 5.4 percent. Their proposed transaction comes just two years after RWE spun off its renewable, retail and network operations to form and split off some of its business to create .

If approved, the deal would spell the end for as a standalone company. It has been in turmoil since former resigned in December and on Monday said it would cut 400 million euros in costs through the end of 2020.

Analysts at Jefferies said while helping achieve scale and efficiencies in networks and retail, and transforming RWE into a leading renewables and security of supply provider, a deal "would involve another two years in costly restructuring".

reported a 3 percent rise in 2017 adjusted operating profit and said it would propose a dividend of 1.60 euros per share for 2017, unchanged from a year earlier.

E.ON, in a separate statement on its annual results, said it would propose a dividend of 0.30 euros per share for 2017 and 0.43 euros per share for 2018.

(Additional reporting by in Frankfurt, Dasha Afanasieva in London, Vera Eckert in and Anneli Palmen in Duesseldorf; Editing by Alexander Smith, and David Evans)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, March 13 2018. 01:14 IST