German power utility RWE to buy Dutch counterpart Essent for $13.4 billion
12 Jan 2009
RWE AG, Germany's second largest and Europe's fifth-largest utility, has agreed to buy Dutch power company Essent NV's commercial operations for as much as €10 billion ($13.4 billion), people familiar with the transaction said.
The takeover may be announced as soon as today and would include Essent's production unit and its retail and business-to-business activities, which both operate in The Netherlands, Belgium and Germany, Essent Trading, which specializes in global energy trading and a 51 per cent stake in German energy company SWB A.
The takeover breaks a deadlock in RWE's plans to expand after it failed to take stakes in competitors such as British Energy. It is the biggest strategic step so far by CEO Juergen Grossmann, who was hired in 2007 to expand the company more aggressively after shareholders were unsatisfied with the reluctance of the previous head of RWE to make acquisitions. (See: German energy major RWE makes £11-billion power play for British Energy / EDF to acquire British Energy for $23.2 billion)
RWE has been saying for two years it's interested in increasing revenue outside its home market and in expanding in Benelux, Annett Urbaczka, a spokeswoman for Essen-based RWE, said. She declined to comment on specific reports about the plans.
RWE fell as much as 1 euro, or 1.6 per cent, to €62.13 in Frankfurt trading and was at €62.52 as of 1:06 p.m. local time.
The deal would be the largest announced in Europe this year. The pace of mergers and acquisitions dropped 39 per cent to $2.48 trillion in 2008 as the credit crisis checked companies' ability to fund deals.
Essent, owned by Dutch provincial and municipal authorities, generated earnings before interest and taxes of €1.5 billion in 2007, unchanged from the previous year, on sales of €7.4 billion. Essent said in June it was looking for an international partner to expand its production and delivery units - which it is separating from its network arms - after it failed to merge with domestic peer Nuon.
