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E.ON to Buy Parts of Endesa for $18 Billion

The world's largest takeover of a power company drew nearer a close on Friday as E.ON agreed to buy parts of Endesa from the Spanish utility's new owners for 11.8 billion euros ($18.6 billion).

Two and a half years after the first bid for the Spanish generator, E.ON said its management and supervisory boards had approved the purchase price for bits of Endesa from the latter's buyers, Italy's Enel and Spain's Acciona.

Endesa was the target of a bidding war that reached 42.5 billion euros before E.ON bowed out in favour of Enel and Acciona, striking a deal last year under which the German company would just buy some of its assets.

E.ON, the world's biggest utility, will now pay 8.9 billion euros for the assets in Spain, France, Italy, Poland and Turkey and will assume some 2.9 billion euros in debt, compared with an initial overall value of about 10 billion euros, it said.

Enel, Acciona and E.ON reached the agreement to carve up Endesa in April 2007 to avoid a lengthy legal battle over accusations of improper behaviour during the takeover process.

It took them -- together with several investment banks -- until Thursday to agree on the valuation of the assets.

Spanish utility Gas Natural had made the first move on Endesa in September 2005, which E.ON topped in February 2006. Enel started to derail E.ON's bid by taking stakes in Endesa, then made a formal bid together with Acciona in March 2007.

The deal may be the last large acqusition by a utility for at least this year, according to E.ON Chief Executive Wulf Bernotat. He told the Wall Street Journal in an interview published on Friday that state protectionism may prevent any further large cross-border deals.

"It's not yet an open market in Europe," he said.

Significant Contribution

The assets, which will make E.ON one of Spain's largest power companies, may help the German company reach the upper end of its earnings forecast this year; for Enel, Italy's biggest power company, proceeds from the sale will help it slash debt.

Enel has said if the deal with E.ON goes ahead it would cut debt by 8.4 billion euros -- a big slice of the 11 billion cut it targets -- reducing its total to 49 billion euros.

E.ON had this month predicted operating profit would rise 5 to 10 percent this year, and the earlier the company finalises the asset takeover, the stronger earnings would rise.

"New shareholdings will already make a significant contribution to our results this year," E.ON said, declining to give more details.

E.ON will gain power plants with a capacity of about 3 gigawatts in Spain and 580,000 power customers -- both less than under the original deal struck with Enel and Acciona last April.

That compares with a total generation capacity of 26 gigawatts E.ON held in Germany at the end of 2006 and some 8 million direct power customers E.ON had then in its home market.

The deal will also give E.ON some 7 gigawatts of generation capacity in Italy, 2.5 gigawatts in France and access to smaller amounts of generation capacity in Poland and Turkey, roughly in line with the agreement from April 2007.

E.ON shares fell 2.5 percent to 118.32 euros.