MOSCOW/COPENHAGEN (Reuters) - Finnish utility Fortum (FORTUM.HE) said on Saturday Russian authorities had approved its acquisition of up to 50 percent of German counterpart Uniper (UN01.DE), playing down the decision to effectively deny it a controlling stake.
The Russian nod, which had been expected despite some concerns over potential scrutiny in Moscow, brings Fortum a step closer to purchasing a 46.65 percent stake in Uniper from Germany’s E.ON (EONGn.DE).
Uniper and Fortum both operate several power plants in Russia.
Fortum said it now expects to receive final regulatory clearance for the 3.8 billion euro ($4.6 billion) acquisition by the middle of the year.
“The Russian Government Commission for Monitoring Foreign Investments has today approved Fortum’s filing under the Strategic Investment Law,” Fortum said in a statement.
In a statement issued after the end of the commission’s meeting, Russia’s competition watchdog said approval was given to Fortum to buy up to 50 percent of Uniper.
“The limitation of the approval to an acquisition of up to 50 percent in Uniper is to Fortum’s understanding the result of a technical matter,” Fortum said.
Russian law restricts the control of strategic activities such as water supply by state-controlled foreign companies.
Fortum is controlled by the Finnish government, and Uniper’s Russian unit Unipro (UPRO.MM) — which is focused on electricity production in gas and coal-fired power plants — holds a license to test tap water at one of its power plants.
Limiting Fortum’s ownership of Uniper to 50 percent would deal a blow to hedge funds that have bought into the German company in hopes of a higher follow-up bid that would give the Finish group a controlling stake.
In December, Knight Vinke and Elliott Management both disclosed holdings in Uniper — 5.02 percent and 7.38 percent, respectively.
Fortum’s Chief Executive, Pekka Lundmark, said in the statement that the 50 percent limit “is not an important hurdle to us as it does not impact our plans to generate value for shareholders.”
“We have come to understand that Uniper management has actively worked against the transaction in Russia, which is unfortunate in light of the need to cooperate between Fortum and Uniper in order to create value together for both our respective shareholders,” he added.
Uniper has been opposed to the deal saying that the combination would make little sense given its heavy exposure to gas and coal-fired power plants while Fortum’s focus is on clean technologies.
E.ON said that the Russian approval fulfilled another precondition for Fortum to buy its 46.65 percent Uniper stake.
“We are optimistic that the remaining official approvals will be given in the coming months, so that the transaction between E.ON and Fortum can be completed as planned,” E.ON said in a statement.
Uniper declined to comment.
Additional reporting by Jacob Gronholt-Pedersen, Polina Devitt, Tom Käckenhoff, Jussi Rosendahl, Douglas Busvine and Christoph Steitz; Editing by Mark Heinrich and Helen Popper