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Veba snares Viag deal
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September 27, 1999: 5:41 a.m. ET
German energy groups agree $14B deal; telecom, other assets to be sold
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LONDON (CNNfn) - Germany's Veba secured a $14.3 billion takeover of rival utility Viag Monday to create Europe's largest listed energy group.
The deal, which the firms branded a merger, is the largest since the deregulation of the European power market at the start of the year, a move which has put both firms under severe price pressure in their domestic market.
Veba will control 67 percent of the merged entity, which will also refocus its sprawling conglomerate structure to focus on the core energy business.
The companies plan to merge their electricity arms and sell a range of assets including telecom, real estate and chemicals units with combined annual revenue of 28 billion euros.
Veba (FVEB) shares advanced 3.2 percent in morning trade Monday while Viag (FVIA) lost 1.3 percent. Lynn Reinhardt, sector analyst at Merrill Lynch in Frankfurt, told CNNfn.com the deal terms were more favorable to Veba than the market had expected.
Viag shareholders will receive one Veba share for every 2.8 Viag shares they hold, with Veba also buying a 10 percent stake in Viag from the state of Bavaria for 1.59 billion euros.
The new firm, which has yet to be named, had pro forma annual revenue of around $77 billion in 1998 and a market capitalization of 40 billion euros ($41.8 billion). The group is to seek an additional listing in New York.
The company will overtake RWE (RWE) to become Germany's largest power firm and third in Europe behind state-owned Electricité de France and Italy's Enel.
The deal is subject to regulatory clearance though both companies were confident of clearance from German and European authorities.
However, Germany's cartel office said last week that approval would require further liberalization of the German sector, insisting the two would have to open their power distribution networks to rivals.
The merger is scheduled for completion by mid-2000, with targeted annual synergies of 800 million euros, with the energy units accounting for 700 million euros. The deal will result in 2,500 job cuts.
The companies said they would merge their electricity assets and jointly develop their telecom and real-estate activities. However, the disposals will include Veba's stake in E-plus, Germany's third-largest cellular operator, and Viag's packaging and logistics units.
-- from staff and wire reports
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