Fortum homes in on Uniper

In a statement late on Tuesday, German utility Eon said Fortum Oyi had offered 22 euros ($25.90) per share, valuing the company's 46.65 percent holding in Uniper at 3.76 billion euros. The bid offers a 4.5 percent premium to Tuesday's closing price and a 36 percent premium to the share price in May, before talk of a potential deal surfaced. If the deal goes through, Fortum will have to make an offer for the rest of Uniper's shares.

Germany's second largest energy company has been seeking a buyer for its Uniper stake ever since it spun off its traditional gas- and coal-fired power stations in 2016. Eon has only retained control of its gas and electricity grid businesses, renewable plants and customer service.

"We welcome Fortum's offer as an opportunity for Uniper shareholders to sell at a valuation level that reflects Uniper's strong performance since its spin-off," Eon Chief Executive Johannes Teyssen said in the statement.

Under the terms of the deal, Eon also agreed to pay compensation if negotiations should finally fail. In that case, Eon would buy back all the shares Fortum acquired during the offer and also pay a 20-percent penalty, amounting to 752 million euros currently.

The group's move comes as German energy utilities face tough choices in the wake of a government decision to switch from fossil and nuclear energy generation to renewables. As a result, Eon was forced to book 11 billion euros in its accounts for last year as it wrote down the value of the fossil fuel assets.

Unsolicited bid

The announcement of a deal between Fortum and Eon was greeted with dismay by Uniper, which said on Wednesday it had not invited a bid by the Finish state-controlled power company.

"This unsolicited takeover offer is clearly not in line with the strategy of Uniper as recently reiterated publicly," Uniper Chief Executive Klaus Schäfer said in a statement.

Fortum said it would launch a voluntary offer for the whole of Uniper in early 2018 and intended to be a constructive partner to the German utility.

"This is not a takeover, it's a significant investment," Fortum Chief Executive Pekka Lundmark told a conference call. "We expect that there will be very interesting cooperation possibilities between the two companies."

Break-up looming large

However, sources close to the matter told the news agency Reuters that Fortum was mainly interested in Uniper's hydropower plants and interests in Swedish nuclear power stations, and it was already working with a partner that might take on Uniper's coal-fired plants.

Uniper operates roughly 40 gigawatts of power plants in Europe and Russia. It has hydroelectric, coal- and gas-fired plants as well as stakes in gas pipelines, liquefied natural gas terminals and nuclear plants across Europe, plus energy trading operations.

State-controlled Fortum is focused on carbon-free power generation, mainly in the Nordic region and Russia, and has been looking for a deal since selling its power distribution grids for 9.3 billion euros in 2014 and 2015.

Fortum CEO Lundmark already said that a deal would not change the company's clean energy vision. Asked whether Fortum could sweeten its offer, he added: "This is very simple. This is the only offer there is."

uhe/aos (Reuters, AFP)