E.On Reaches Deal with Rivals to Abandon Endesa Bid

Germany's E.On on Monday abandoned its politically sensitive bid to take over Spain's Endesa, announcing a deal with rivals Enel and Acciona that will see those companies bid for Spain's biggest power utility.

Under the deal, gas and electricity utility E.On would acquire for cash power generation assets that it valued at some 10 billion euros ($13.4 billion) in Spain, Italy, France and elsewhere.

E.On said in a statement it had signed an agreement with Enel of Italy and Spain's Acciona -- now Endesa's biggest shareholders -- "in order to put an end to the substantial uncertainty" over its 42.4 billion euros ($56.6 billion) bid for Endesa.

"E.On will not carry out the takeover bid designed to acquire a majority stake in Endesa," the Duesseldorf-based company said. It added that it "will renounce making a new takeover offer for Endesa in the next four years."

"Enel and Acciona commit themselves to launch a takeover bid for Endesa in the very near future," E.On said.

Enel, a power company, and Acciona, a construction and energy firm, said in a statement the deal cleared the way for them "immediately to launch" an offer of at least 41 euros ($54.78) per share for Endesa. It did not give a total value for the offer, but that price is higher than E.On's bid, which valued Endesa shares at 40 euros ($53.44) each.

Endesa shares closed at 40.44 euros ($54.04) in Madrid on Monday, down 0.1% on the day, before E.On made its announcement.

E.On said that, if Enel and Acciona succeed in acquiring Endesa, "E.On will receive an extensive portfolio of equity holdings including operations in Spain, Italy and France as well as additional activities in Poland and Turkey."

The total value, E.On said, would be about 10 billion euros ($13.4 billion). It said that, in Spain, it would acquire the power utility Viesgo from Enel, and would receive additional generation capacity from Endesa, making it the fourth-largest player on the Spanish power market.

In Italy, E.On said it would acquire E.On Endesa Italia, making it the fourth-largest power producer there too; and in France, it will get Endesa France/SNET, becoming that country's No. 3.

Spain's Socialist Government

Spain's Socialist government initially attempted to block E.On's bid for Endesa, preferring a domestic bid from Spain's Gas Natural and imposing a slew of conditions on any possible takeover -- most of which were lifted under pressure from the European Commission.

Gas Natural eventually bowed out of the running, but E.On's bid was then complicated by Enel moving to build a stake in Endesa. The Italian and Spanish governments have denied they encouraged Enel to buy the shares.

Enel and Acciona now control almost 46% of Endesa through stakes and share swap agreements. E.On has no stake.

E.On tried to salvage its campaign for Endesa by increasing its offer -- most recently on March 26, when it sweetened the bid to 42.4 billion euros ($56.6 billion) bid from 41 billion euros ($54.8 billion).

Endesa's board of directors recommended that shareholders accept the German bid, but Acciona and Enel pledged that they would make an even higher offer.

"Acciona's and Enel's involvement in Endesa has made our original goal of acquiring a majority stake in Endesa impossible," E.On chief executive Wulf Bernotat said in a statement. "Obtaining a minority interest in Endesa would have led to a stalemate between the shareholders and triggered unpredictable lawsuits."

"The agreement we have reached with Enel and Acciona will rapidly establish clarity for everyone involved," he added. "At the same time, in one step, E.On will establish attractive market positions in Spain, Italy and France, which we look forward to further developing."

Acciona and Enel said the three companies had agreed to withdraw all the legal action they had initiated against each other in the course of the takeover battle.

Acciona Chairman Jose Manuel Entrecanales said the deal "ensures peace within Endesa and a better deal for shareholders, and at the same time further enhances competition in the Spanish market with the entrance of a new player."