EON SE is targeting about 700 million euros ($860 million) in cost savings from the acquisition of Innogy SE from German rival RWE AG, a deal that will transform the country’s energy industry as utilities grapple with the accelerating shift to renewables.
EON expects significant annual cost savings by reducing overlap on the two Essen-based headquarters, administration functions, network and customers, said the people, who asked not to be identified because talks are private. RWE may reap at least 50 million euros in synergies from assets it will receive in the deal including the renewable-generation businesses, the people said.
EON and RWE representatives declined to comment. The amount of savings are estimates and could still change, the people said.
Shares of EON rose as much as 7.4 percent, the most since February 2016, as of 4:26p.m. in Frankfurt trading. RWE was up 10.6 percent after earlier gaining as much as 14.3 percent.
The deal, which values Innogy at about 22 billion euros in equity and about 43 billion euros including debt, continues years of upheaval for competitors RWE and EON started by German Chancellor Angela Merkel’s move toward an economy powered by renewable energy instead of nuclear and fossil fuels.
RWE will end up with EON’s renewables business, minority stakes in two nuclear power plants, Innogy’s gas storage business and a stake in an Austrian energy supplier. Including the asset swaps, the whole transaction has an enterprise value of about 60 billion euros, the people familiar said.