August 27, 2018 / 10:59 AM / in 9 months

German cartel watchdog to examine RWE-E.ON cross-shareholding

RWE logo in Essen, Germany, March 14, 2017. Reuters/Thilo Schmuelgen

BONN, Germany (Reuters) - Germany’s antitrust regulator will examine a deal by utility groups RWE and E.ON to carve up Innogy with a focus on a cross-shareholding between the two firms that is part of the transaction.

Under the landmark deal, Innogy - which is 76.8 percent-owned by RWE - will be broken up, with RWE keeping the unit’s renewable assets and getting those of E.ON. E.ON, in turn, will get Innogy’s retail and network activities.

The transaction, first announced in March, also includes RWE receiving a direct stake of 16.67 percent in E.ON, creating an ownership link between the two German energy groups.

“This is an unusual constellation,” Federal Cartel Office President Andreas Mundt said on Monday.

The German antitrust watchdog is in close contact with the parties to the deal and the European Union’s competition authority and, Mundt said, would focus on the parts of the deal that are not addressed by Brussels.

“If we look at the acquisition of this 16.67 pct stake in E.ON then we have to be involved,” said Mundt.

He added that RWE’s market position before the deal as a primary seller of electricity was relevant to the cartel office’s review of the deal.

Also, he said, the stake’s size, worth 3.5 billion euros ($4 billion) as of Friday’s close, meant RWE would gain considerable influence over E.ON. How this plays out in terms of its ability to influence the outcome of shareholder meetings or fill board positions was relevant.

($1 = 0.8744 euros)

Reporting by Douglas Busvine; editing by David Evans

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