Explainer: Anything goes as Uniper, Fortum push relationship reset button

FRANKFURT (Reuters) - German utility Uniper said on Wednesday there were no taboos in the fresh talks it will hold with its largest owner Fortum, breaking a long-standing deadlock between the two and potentially paving the way for a full take over.

FILE PHOTO: A logo of German energy utility company Uniper SE is pictured in the company's headquarter in Duesseldorf, Germany, March 8, 2018. REUTERS/Thilo Schmuelgen/File Photo

Fortum - majority owned by Finland - has a 49.99 percent stake in Uniper. Activist investors Elliott and Knight Vinke have disclosed stakes of 17.84 percent and 5.02 percent, respectively.

Talks between Uniper and Fortum - which will not include Uniper’s CEO and CFO who will step down in August - could result in a cooperation agreement or follow up bid for the remainder of Uniper, investors, analysts and sources say.

Below are some of the developments that could take place in the course of the year:


Since becoming Uniper’s largest shareholder last year following a deal with E.ON, Fortum has tried to strike a cooperation agreement with Uniper, whose management had opposed the transaction from the get-go.

While Fortum’s Chief Executive Pekka Lundmark as recently as last week described the results of these efforts as “disappointing”, the resignations of Uniper’s CEO and CFO, which were announced late on Tuesday, could move things along.

The discussions, which will take place in a top-level working group where Uniper will be represented by its remaining two management board members, aim at exploring partnership opportunities on a strategic and operational level.

Talks could lead to closer cooperation between the two energy firms in some markets, including Russia, with Jefferies estimating potential cost saving synergies for Uniper of 682 million euros ($776 million), or 1.90 euros per share.


Expectations are that Fortum will, one way or another, eventually gain full control of Uniper, given the Finnish group approached its German peer regarding a takeover in the summer of 2017, albeit without success.

Instead, Fortum spent 3.8 billion euros on buying the 47 percent stake in Uniper that E.ON held onto after spinning the company off three years ago, picking up only a few additional shares in the full bid it had to make as part of the deal.

At Uniper’s current market value, the remaining stake would cost Fortum 4.8 billion euros plus any premium the group would certainly have to pay.

Analysts at JP Morgan are less enthusiastic about the prospect of a bid, pointing to uncertainties raised by a recent government proposal to close coal-fired power stations in Germany and its impact on local utilities.

“If anything this unlocks an unproductive situation, and we believe that Fortum is likely to wait for more clarity on the German coal and lignite phase-out compensation,” JP Morgan analysts wrote.


Uniper Supervisory Board Chairman Bernhard Reutersberg, despite saying nothing was off-limits in discussions, said that no substantial results were expected before the group’s shareholder meeting in May.

The relationship between both companies has been shaped by mistrust and allegations in the past, with Uniper calling Fortum a “wolf in sheep’s clothing” and Fortum saying Uniper actively tried to prevent a takeover from happening.

One hurdle to fully integrating the two companies is a water license owned by Uniper’s Russian unit Unipro. If Unipro keeps the license, a Russian ban on foreign state-owned entities owning a majority in local strategic assets would prevent Fortum from owning more than half of Uniper.


Elliott, which has also recently taken stakes in Thyssenkrupp and Bayer, will certainly have an external influence on the talks.

The activist investor has significantly raised its stake in Uniper in recent months and a source familiar with the matter told Reuters that a further increase was possible.

Elliott has so far remained tight-lipped in its role as a shareholder, at least publicly, apart from backing a motion last year to investigate whether Uniper tried to block the sale of E.ON’s stake to Fortum.

Given the size of Elliott’s stake, it will be difficult for Fortum to gain full control over Uniper via a domination agreement unless it is supported by the fund, given Fortum needs a three-quarter majority at Uniper’s annual general meeting to make that happen.

Elliott declined to comment and Knight Vinke was not immediately available for comment.

Editing by Kirsten Donovan