Eon expects to cut up to 5,000 jobs with Innogy acquisition

Eon could cut up to 5,000 jobs as it expects to make synergies of €600 to €800 million under a major asset swap with RWE, which will see Eon acquire Innogy.

In a joint statement released by Eon and RWE yesterday (12 March), the companies said “initial calculations” show the integration process will lead to a reduction of a maximum of 5,000 jobs of the “significantly more than 70,000 jobs” at the enlarged Eon.

It said the cuts would equate to less than 7 per cent of the workforce, but outlined Eon anticipates creating “thousands of new jobs in the coming decade.”

“Structural change is always associated with uncertainty for affected employees. Eon 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,” the statement says.

RWE does not expect any staff reductions in the coming years as a result of the transaction.

The deal, first announced in principle on Sunday (11 March), was approved by both companies’ boards yesterday and will see Eon acquire RWE’s 76.8 per cent stake in Innogy.

Via an asset exchange RWE will receive Eon’s renewables business, as well as Innogy’s renewables and gas storage businesses. It will also receive a 16.67 per cent stake in the enlarged Eon and will pay the company €1.5 billion.

Eon will make a voluntary public takeover offer to Innogy’s minority shareholders at a total value of €40 per share.

The companies claim the transaction will “create two stronger” European energy companies. The move will see Eon concentrate on retail and networks, while RWE focuses on renewables and other forms of generation.

Johannes Teyssen, chief executive of Eon, said: “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 Eon’s and Innogy’s activities in the fields of networks and customer solutions will allow Eon to enhance its strong offering along the part of the energy value chain that is closest to the customer.”

After the integration of Eon’s and Innogy’s renewables businesses, RWE said it will run CO2-free generation capacity amounting to approximately 8 GW from offshore and onshore wind as well as hydro and photovoltaics.

RWE claims it will become number three in Europe in the renewable energy business, and number two in wind power.

Rolf Martin Schmitz, chief executive of RWE, said: “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 Eon create attractive, sustainable prospects for our company, our employees and our shareholders.”

The deal is expected to complete by the end of 2019, but until then Eon, RWE and Innogy will remain separate businesses and competitors, according to the statement.

The voluntary public takeover offer period is expected to commence in early May 2018, following approval of the offer document by BaFin (the German Federal Financial Supervisory Authority).