FRANKFURT (Reuters) - Fortum on Tuesday made progress in talks over cooperation with energy group Uniper, of which it owns 49.99%, shortly after activist funds stepped back from increasing pressure on the Finnish utility to seek full control.
Uniper and Fortum have had a strained relationship ever since the Finnish state-owned company launched a takeover bid for the German group in 2017 which Uniper opposed.
Now Fortum has struck a deal with activist shareholders Elliott and Knight Vinke to try to resolve a standoff that has paralyzed Uniper and has prevented Fortum from acquiring the remaining stake, two people familiar with the matter said.
The activist funds, which together hold about 23 percent in Uniper, have agreed to back Fortum’s strategy in return for a commitment that the Finnish group will help to clear a key legal hurdle to a full Uniper takeover, the people said.
Elliott and Knight Vinke will also get an opportunity to sell their stakes, one of the people said. It was not clear whether Fortum, Uniper or a third party would be able to offer to buy them.
Fortum, Elliott and Knight Vinke declined to comment.
Russian regulators ruled last year that Fortum cannot own more than half of Uniper as long as Uniper’s Russian business Unipro owns a local water-testing license.
One source said Fortum had committed to work with Uniper’s new management to remove that hurdle. Uniper had resisted tackling the issue in Russia, which had led to tensions with Fortum. But earlier this month, Uniper appointed a new CEO and CFO in a sign of movement in its standoff with Fortum.
“Fortum has understood that Uniper is now seeking a new approach to align interests of all stakeholders, including investors, employees and customers,” one of the people said.
Uniper’s Chairman Bernhard Reuterberg said late on Tuesday Forum’s allegations of Uniper having played a role in the regulatory restrictions in Russia were without merit.
“Everything Uniper has undertaken in this context was legal and in the interest of the company and its shareholders,” he said in a statement.
Shares in Uniper closed 0.3% lower after falling as much as 5.5%.
Elliott and Knight Vinke had originally asked shareholders to vote on proposals to allow Fortum to gain full control of Uniper. But they withdrew their motions on Tuesday, a day ahead of Uniper’s annual general meeting.
“Fortum and Uniper have made progress in discussions regarding a shared vision for the companies,” Fortum said in a statement.
“However, Fortum remains concerned about certain aspects of Uniper’s conduct during and after the PTO (public takeover offer) process, including actions taken in Russia that resulted in regulatory restrictions,” the group said.
This latest attempt by the two groups to repair their strained relationship and explore cooperation has fueled expectation of a follow-up bid.
Fortum CEO Pekka Lundmark, interviewed in German newspaper Handelsblatt, said in response to questions about a potential break-up of Uniper that Fortum was interested in Uniper as a whole.
Editing by Tassilo Hummel/Edward Taylor/ Jane Merriman/David Evans