Finnish utility Fortum Oyj is in talks with Germany’s EON SE about acquiring its 47 percent stake in legacy fossil fuel and trading business Uniper SE as part of a plan to buy the whole company, according to people familiar with the matter.
Fortum is discussing a purchase of the German renewable company’s stake to lay the groundwork for a full takeover of Uniper, which is worth about 6.4 billion euros ($7.1 billion), said the people, who asked not to be identified because talks are private. Talks are ongoing and no final decision has been made, and Uniper could also attract interest from other companies and buyout firms, they said.
EON could possibly agree to a deal with Espoo-based Fortum this year, though the transaction could extend until 2018, the people said. The timing could depend on discussions about a tax payment that would be triggered if EON sold its stake this year without prior consultation with the country’s tax authorities.
“EON doesn’t comment on market speculation,” a spokesman said in an email. “As announced earlier EON will sell its Uniper stake from 2018.” A representative for Fortum declined to comment.
EON, Germany’s largest producer of renewable energy, floated a 53 percent stake in Uniper in September in response to Germany’s shift to solar and wind power from nuclear and fossil fuels. Chief Financial Officer Marc Spieker said the company will dispose of its remaining stake in Uniper as soon as a tax restriction is lifted at the end of this year.
“All venues are open, be it private transactions, be it financial investors, be it strategic investors,” he said in an interview this month.
Uniper shares rose 4.1 percent to close at 17.36 euros in Frankfurt on Wednesday, the biggest gain since December, after earlier jumping as much as 9.7 percent.
Finland’s biggest power company, about halfway through spending the 9 billion euros brought in from the sale of its Nordic electricity-distribution grids two years ago, is focusing on finding ways to generate shareholder return from its remaining cash pile, Chief Executive Officer Pekka Lundmark said in April.
“The market may have underestimated Fortum’s firepower, which could exceed 5 billion euros,” said Sam Arie, an analyst at UBS Group AG in London. “We’re positive about capital deployment at Fortum.”
Essen-based EON hired Goldman Sachs Group Inc. and investment bank Greenhill & Co. last year to advise on strategic issues including defense. Energy companies in Europe have announced about $50 billion in deals so far this year, more than double the same period a year ago, according to data compiled by Bloomberg.
Uniper houses everything from hydroelectric, coal- and gas-fired plants to stakes in gas pipelines and nuclear power sites, while EON focuses on renewables, networks and retail consumers. Fortum may prefer certain businesses and could always sell some of the assets later, the people said.
EON sold new shares worth 1.35 billion euros in March and said it may also offer hybrid bonds to reach its target of raising 2 billion euros in fresh money. The proceeds will help fund cleanup after Germany phases out nuclear power by 2022.