• E.ON will be transformed into a highly focused provider of European energy networks and state-of-the-art customer solutions, ideally positioned to drive Europe’s energy transition by innovation. This transformation anticipates the rising and legitimate demands of its customers in Germany and Europe, for instance in electro-mobility or the increasing interconnectedness of production and offers in regional energy networks.

• RWE will become a leading European electricity producer by means of renewable energy with attractive growth potential, optimally combined with security of supply through its conventional power plants and energy trading.

• E.ON to acquire RWE’s 76.8 percent stake in innogy. Via an asset exchange, RWE will receive substantially all of E.ON’s renewables activities, innogy’s renewables business, a minority stake of 16.67 percent in the enlarged E.ON and certain other assets. E.ON will receive a cash payment of €1.5 billion from RWE.

• E.ON to make a voluntary public takeover offer (PTO) to innogy’s minority shareholders. The total offer value of €40.00 per share will consist of an offer price of €36.76 per share, plus the payment of assumed dividends from innogy SE of a total of €3.24 per share for the fiscal years 2017 and 2018.

• E.ON expects significant synergies amounting to €600 to €800 million annually by 2022.

• Both companies remain fully committed to retaining their respective investment grade ratings.

E.ON and RWE agreed today that RWE will transfer its entire stake of 76.8 percent in innogy to E.ON via a far-reaching exchange of assets and businesses.

The transaction will create two stronger European energy companies headquartered in Essen, Germany. As a leading company, the newly created E.ON will have a clear focus on intelligent networks and customer solutions, ideally positioned to become an innovative force behind the energy transition in Europe. RWE will become a broadly diversified power producer optimally complementing a large portfolio of renewables assets with its conventional energy generation and linking the two with its existing trading platform. This set-up will enable RWE to generate sustainable, profitable growth.

The transaction brings together the strengths of both previously vertically integrated German energy utilities by enabling a focus on networks and customer solutions on the one hand, and on a fully diversified generation business on the other.

In detail, it was agreed that RWE will sell its 76.8 percent participation in innogy to E.ON for: (I) a resulting shareholding in E.ON of 16.67 percent from authorised capital as part of a non-cash capital increase by E.ON; (II) substantially all of E.ON’s renewables activities; (III) innogy’s renewables business; (IV) the minority stakes currently held by E.ON’s subsidiary PreussenElektra in the RWE-operated power plants Emsland and Gundremmingen; and (V) innogy’s gas storage assets and its participation in the Austrian energy utility Kelag. Additionally, the transaction agreement provides for a payment from RWE to E.ON of €1.5 billion. The transaction values RWE’s 76.8 percent stake in innogy at €40.00 per share, including the assumed dividends of innogy SE for the fiscal years 2017 and 2018 of a total of €3.24 per share to which RWE will remain entitled.

E.ON will also make a voluntary public takeover offer in cash to the current minority shareholders of innogy. This offer will provide innogy shareholders with a total value of €40.00 per share as of today, which represents a premium of 28 percent to innogy’s last share price unaffected by media speculation on 22 February 2018, and a 23 percent premium to the three-month volume-weighted average trading price (VWAP). The total value consists of an offer price of €36.76 per share plus the payment of a total of €3.24 per share for the fiscal years 2017 and 2018 from assumed dividends of innogy SE, which the current shareholders will still receive. If the takeover offer completes prior to the date on which innogy’s Annual General Meeting resolves on the dividend for the fiscal year 2018, E.ON will increase the offer price such that the total value of €40.00 per share remains unchanged for the shareholders of innogy.

E.ON to become a game changer in the decentralised energy world

The new E.ON will be the first formerly integrated European energy company to focus entirely on meeting the demands of its around 50 million customers across Europe, with intelligent networks and innovative customer solutions at its heart.

Johannes Teyssen, CEO of E.ON: “This strategic exchange of businesses will create two highly focused companies that will shape a better future for Europe’s energy landscape. Each company will have a stronger entrepreneurial core. Bringing together E.ON’s and innogy’s activities in the fields of networks and customer solutions will allow E.ON to enhance its strong offering along the part of the energy value chain that is closest to the customer. The new E.ON will be able to intensify its efforts towards climate protection, for example through the faster roll-out of charging networks for e-mobility or the advancement and extension of smart grids in Europe. In turn, our renewables platform will become part of a stronger joint entity within RWE.”

RWE to become one of the European leaders for renewable energy and security of supply

After the integration of E.ON’s and innogy’s renewables businesses, RWE will run CO2-free generation capacity amounting to approximately 8 Gigawatt (GW) from offshore and onshore wind as well as hydro and photovoltaics. RWE will thereby become number three in Europe in the renewable energy business as a whole, and number two in wind power. This opens up attractive growth prospects, with a concrete project pipeline in Europe and the US. The combination of renewable and conventional power generation will allow the company to help actively and responsibly transform and reshape energy systems in support of ambitious climate protection targets.

Rolf Martin Schmitz, CEO of RWE: “Renewable and conventional energy generation are two sides of the same coin when it comes to the transformation of the energy world. The expansion of CO2-free electricity generation will increasingly evolve from a regulated sector to a normal competitive market. Significant size is crucial for success in this future-orientated business. At the same time, security of supply remains the beating heart of any future-proofed industrial society. Our trading platform links and seamlessly brings to market all energy assets in our portfolio. The combination of these businesses, together with our solid financial situation allowing for growth investments, make RWE a strong partner of the energy transition – beyond the borders of Germany. The core business of the company and our solid financial stake in E.ON create attractive, sustainable prospects for our company, our employees and our shareholders.”

Significant value creation for all stakeholders

E.ON and RWE will be strategically well positioned after this transaction. Both companies are convinced that their positions in their respective core businesses can be further strengthened. Their solid financial foundations will provide a basis for sustainable profit growth and attractive dividends in the long term.

Bolstered by the high earnings quality of its regulated business post transaction, E.ON’s executive board reiterates its intention to maintain a strong BBB rating. RWE will be able to underpin its investment grade rating based on additional stable cash flows from its renewables business.

E.ON’s straightforward corporate structure will facilitate innogy’s integration. E.ON expects significant synergies amounting to €600 to €800 million annually by 2022. Initial calculations show that the integration process will lead to a reduction of a maximum of 5,000 jobs of the then significantly more than 70,000 jobs at the enlarged E.ON. This equates to less than 7 percent. At the same time, E.ON anticipates to create thousands of new jobs in the coming decade.

The two renewables businesses of more than 2,500 employees will be brought together within the RWE group alongside RWE’s existing segments. The stake in regional utility Kelag, with extensive hydropower activities, will fit in excellently with the company’s new focus on renewable energy. Gas storage, which will remain unbundled, will complement RWE’s gas activities and will be assigned to the Supply & Trading segment. Overall, RWE does not expect any staff reductions in the coming years as a result of the transaction.
Both companies pledge that any integration measures will be carried out based on long established partnerships with the representatives of the works councils and trade unions.
Structural change is always associated with uncertainty for affected employees. E.ON and RWE are convinced that, by combining forces, each of the business areas that are touched by this transaction will have better prospects than before.

Two strong companies with clear focal points and growth prospects will offer an environment in which employees can develop further. E.ON and RWE will be well equipped to face the future challenges of the energy transition. Both have every intention, together with their customers, partners and employees, to shape the energy world of tomorrow and to make a substantial contribution to achieving climate protection targets.

Transaction expected to close by the end of 2019

Until the transaction completes, E.ON, RWE and innogy remain separate businesses and competitors. The voluntary public takeover offer period is currently expected to commence in early May 2018, following approval of the offer document by BaFin (the German Federal Financial Supervisory Authority, Bundesanstalt für Finanzdienstleistungsaufsicht). Closing of both, the asset exchanges between E.ON and RWE, and the PTO, is subject to approval by the relevant antitrust and regulatory authorities. Closing of the PTO is expected by the middle of 2019. The transfer of the renewable energy business from E.ON and innogy to RWE is to take place as soon as possible thereafter and could be completed by the end of 2019.

Advisors

E.ON’s financial advisors are Perella Weinberg Partners and BNP Paribas, Linklaters acts as legal counsel for E.ON.

BoFA Merrill Lynch and Citigroup act as financial advisors to RWE in this transaction. Rothschild provided a fairness opinion to RWE’s Supervisory Board. Freshfields Bruckhaus Deringer act as legal counsel.