Fortum has today agreed to pay €2.3 billion (US$2.5 billion) to increase its stake in European utility Uniper to 70.5%.
Finland-headquartered Fortum had previously held a 49.9% share in Uniper since 2017 and has since wanted to increase it to a controlling stake. This is a move Uniper had previously strongly resisted – to the extent that several top bosses quit this year, including chief executive Klaus Schaefer and finance chief Christoper Delbrueck.
Since then, however, Fortum has said that negotiations with new Uniper chief Andreas Schierenbeck have been very constructive.
Under the new deal, Fortum will pay about €2.3 billion for the combined shareholding, corresponding to €29.93 (US$32.78) per share. This takes Fortum’s total investment in Uniper to approximately €6.2 billion (US$6.8 billion), representing an average acquisition price of €23.97 (US$26.25) per share.
In a statement, Fortum said that it has been its preference “to agree with Uniper on a joint path forward, yet discussions have each time ended short of actions. Fortum is convinced that this change in Uniper’s ownership structure as well as a resolution of the complex relationship between all parties will return stability and put focus solely on the business and the opportunities available to us.”
Uniper was spun off from Germany’s E.ON. Uniper’s generation portfolio includes hydro, coal, gas and nuclear. The company owns 2 GW of hydropower in Germany and 1.6 GW in Sweden, as part of a total portfolio of 36.6 GW across seven European countries. Hydropower accounts for more than a third of Fortum’s annual power generation, from 13 hydro plants in Finland and an additional 20 through its stake in Kemijoki Oy.
Closing of the deal is subject to regulatory clearances in Russia and the U.S. and is expected by the end of the first quarter of 2020. No European Commission clearance is needed as Fortum already received unconditional merger clearance from the EC last year.
“I am pleased that we have taken this important step to create a leader in the European energy transition,” said Fortum president Pekka Lundmark. “I am convinced that this will create attractive opportunities for both companies and their employees. For Fortum’s shareholders this transaction will be earnings accretive. As always, this investment follows our prudent investment criteria to add value reflecting carefully managed risks.”
Fortum said it “intends to be represented on Uniper’s Supervisory Board commensurate with its ownership without delay.”
It added that the strategic and operational rationale was based on the belief that “utilities play a key role in the transition towards a carbon-neutral Europe by decarbonising their energy supply. At the same time, they must ensure that energy is always available at an affordable cost to consumers and industry. When Fortum first announced its investment in Uniper in 2017, Fortum said that together the companies would not only create value for all stakeholders but could also take a leading role in the European energy transition. The portfolios of Fortum and Uniper are synergistic in Sweden and Russia, while the investment in Uniper offers Fortum access to Germany and other continental European markets where the two companies have very little overlapping businesses.”
Fortum said in a statement that it “looks forward to working with Uniper’s management team and employees on the creation and implementation of a joint vision. In the rapidly changing and decarbonising European energy sector, the vision must be centred around three cornerstones of Sustainability, Affordability and Security of Supply.”
With regard to Uniper staff, Fortum said that it “recognises that the dedication of Uniper employees is the foundation for the current and future success of the company, and wishes to provide them certainty and stability.” It said it was committed to protecting the interests of Uniper employees and added that it will honor existing shop and collective bargaining. It also stressed that it “will not cause Uniper to implement compulsory redundancies as a result of the transaction nor to relocate its corporate seat away from Düsseldorf.”