Vattenfall agrees €8.5bn cash offer for Nuon

By Michael Steen in Amsterdam
Published: February 23 2009 11:35

Vattenfall, the state-owned Swedish power company, has agreed to buy the production and supply business of Dutch peer Nuon for €8.5bn ($10.9bn) in cash.
The deal follows last month’s announcement by RWE, the German utility, that it was buying Essent, another Dutch power company, for €9.3bn.
The sales have been prompted by a Dutch law on energy “unbundling” that calls for utilities to separate their regulated and unregulated businesses by 2011. In both cases, the respective power grids and distribution networks will remain in the hands of the local and regional governments that are the existing owners of both Nuon and Essent.
Lars Josefsson, Vattenfall’s chief executive, said the acquisition was part of a medium-term strategy to expand the group’s reach outside its core markets of Sweden, Finland, Germany and Poland.
“Our target area is the European Union north of the Alps,” Mr Josefsson told a news conference, noting that he saw further opportunities to expand in the UK, Benelux, France and Poland.
Vattenfall will initially take a controlling 49 per cent stake in Nuon, which produces and sells electricity and supplies gas. The Swedish group will build up its position to full ownership over the course of six years, the companies said. Vattenfall is paying €10.3bn for Nuon’s shares. The deal’s enterprise value is €8.5bn since Nuon has €1.8bn of net cash.
“The step-by-step transfer of shares underlines the joint commitment of Nuon’s shareholders and Vattenfall to secure the public interests and Dutch interests served by Nuon,” the companies said in a statement.
The prospective sale of the two biggest Dutch utilities to overseas rivals has provoked criticism in the Netherlands. Essent and Nuon had explored a merger to create a Dutch champion but that failed.
In measures aimed at pre-empting public concern in the Netherlands, four of the eight supervisory board members at Nuon will continue to be appointed by current shareholders and members of the works council and at least five board members will be Dutch residents.
Vattenfall said there would be no redundancies as part of the takeover. It will continue to use Nuon’s existing offices and use the Nuon name for at least four years.
Both Essent and Nuon argued that they needed to find international partners for their commercial operations in order to gain greater scale on the European energy market.
Vattenfall said the deal would allow the companies to accelerate investment in renewable energy and carbon dioxide capture and storage technologies. The Swedish group, which is also a nuclear operator at home, has pledged to become carbon neutral by 2050.
RBS, Rothschild and NIBC advised Vattenfall while Goldman Sachs and ING advised Nuon.
Copyright The Financial Times Limited 2009