RWE Shares Soar After Report Innogy Unit is Engie Takeover Target

By Natascha Divac

FRANKFURT--Shares in German energy producer RWE AG (RWE.XE) and its renewables unit Innogy SE, soared Tuesday following a report that French gas monopoly Engie SA was interested in acquiring newly spun-off Innogy.

Shortly after opening, RWE and Innogy jumped more than 7% and 5% respectively, before shedding gains. At 0843 GMT shares in RWE, which still owns 77% in Innogy, traded 5.5% higher, while Innogy was up 3.8% at EUR34.70 ($37.05).

Bloomberg reported late Monday that Engie was weighing an offer for Innogy, citing people familiar with the matter. The deliberations were preliminary and may not lead to an offer, Bloomberg reported.

In a statement early Tuesday, RWE declined to comment on the report. It added that a full sale wasn't foreseen in any part of its spin-off strategy, which separated its wind, solar, grid and retail business into the new company. RWE added it could "in principle sell... shares and thereby reduce its stake to 51%," but that no decision has been taken.

Innogy has a market value of roughly EUR18.6 billion based on Monday's closing price.

Traders dismissed the speculation early Tuesday. "If Engie was interested in Innogy, it could have gotten it at a lower price and more easily at the time of the spin-off," said one trader.

Like other utilities in Germany and parts of Europe, RWE has been hurt by low wholesale electricity prices amid a power glut spawned by a rise in renewable energy and low commodity prices. To respond to the tough conditions, both RWE and its main competitor E.ON SE have split themselves in two, separating their renewable segments into new companies.

"While Innogy's businesses would clearly fit with Engie's new strategy to focus on renewables, infrastructure and customer solutions, a transaction would seem surprising in our view as Engie seemed more inclined to pursue bolt-on acquisitions rather than big transformative deals," said an analyst at Bryan Garnier.

"More importantly, RWE does not appear inclined to fully sell its current stake in Innogy, which was confirmed by the group yesterday evening. In all, we believe such an acquisition would add complexity and uncertainty to Engie's case."

Michael Denzin contributed to this article

Write to Natascha Divac at [e-mail]

(END) Dow Jones Newswires

March 14, 2017 05:48 ET (09:48 GMT)

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