Uniper subject to new takeover approach by Fortum

Fortum has closed an agreement with investors Paul E. Singer and related entities (Elliott) and Eric Knight (Knight Vinke) to acquire in excess of 20.5% of Uniper’s shares. This could increase Fortum’s share in Uniper to more than 70.5% from currently 49.99%. The deal remains subject to regulatory approval in both the United States and Russia. The latter is uncertain: Russian authorities had previously vetoed a majority takeover by Fortum as part of Uniper’s business activities are strategic to the country. To Scope’s knowledge, the Russian law (Russian Strategic Investment Law) that blocked the takeover remains unchanged. The same applies to the organisational setup of Uniper, which comprises activities under PAO Unipro.

Fortum expects the transaction to be closed and cleared by authorities by the end of Q1 2020 following discussions with Russian state authorities and a preparatory filing to the Russian Federal Antimonopoly Service. While Fortum believes the obstacle for a takeover can be removed, it remains to be seen whether Russian authorities will eventually change their view.

Rating implications: Uniper’s future as an independent company

From a rating perspective, the question is whether and/or for how long Uniper remains an independent company, even if Fortum succeeded with a takeover.

Even if the new takeover bid was successful, Fortum has officially ruled out a domination and/or profit-and-loss transfer agreement or a squeeze-out for at least two years. All would initiate judicial proceedings to determine the amount of an ‘adequate compensation’ and settlement for minority shareholders under the German Aktiengesetz. Any cash settlement in excess of the EUR 2.3bn debt-financed amount for the shares from Elliott and Knight Vinke would further stretch Fortum’s balance sheet and undermine its current financial policy.

From Scope’s perspective, Uniper remains an independent company in the absence of a domination or profit-and-loss transfer agreement. Fortum could only receive full control via a majority on Uniper’s supervisory board, with which it can install relevant directors and determine Uniper’s financial decisions, e.g. on investments/divestments or financial policy including dividend pay-outs. Fortum intends to be represented on Uniper’s supervisory board with immediate effect and commensurate with its ownership without delay, but this would not necessarily lead to a majority on Uniper’s supervisory board any time soon. Firstly, Uniper’s supervisory board is composed equally of shareholders’ and employees’ representatives. Hence, Fortum could directly impact its composition by, for example, installing a chairman. Secondly, changes in the supervisory board require a vote at a general shareholders meeting.

Consequently, Scope retains its view of regarding Uniper as an independent company until the likely outcome of Fortum’s takeover approach is more certain.

On 6 May 2019, Scope affirmed its BBB+/Stable issuer rating for Uniper SE. The affirmation was driven by Uniper’s status quo as an independent company, strong credit metrics, further bolstered by the commodity price rebound, and the gradual expansion of robust regulated and quasi-regulated activities.

This publication does not constitute a credit rating action. For the official credit rating action release click here.