E.On's acquisition of Ruhrgas is back on again after the German Ministry of Economics cleared the deal but imposed strict conditions in a bid to overturn a court injunction barring it.
E.On's proposed take-over of Ruhrgas is still far from signed and sealed.
The German government again cleared E.On's proposed 10.4 billion euro ($10.2 billion) take-over of the country's biggest gas distributor on Thursday, but imposed conditions designed to persuade a court to lift an injunction holding up the deal.
The Ministry of Economics first gave the utilities giant permission to go ahead with the take-over of Ruhrgas on July 5, overruling antitrust authorities' objections that it would damage competition in Germany's liberalised energy markets. Deputy Economics Minister Alfred Tacke said a new hearing hadn't shaken the government's view.
"The combination brings substantial overall economic benefits,'' Tacke told a news conference. "It strengthens particularly the competitiveness of Ruhrgas on international gas markets and helps strengthen the security of German energy supplies in the long-term.''
E.ON is set to become an even bigger energy player.
He said the government will now present the "clearly sharpened'' conditions to the Düsseldorf court and ask it to lift its blocking order on the deal. Should it life the order, E.On, Europe's second-largest utility, would control most of Germany's gas imports and have access to some of the world's largest gas reserves.
New conditions hinge on the sale of stakes
Under the revised terms, both E.On and Ruhrgas have to dispose of their stakes in Bavarian gas provider Bayerngas and utility Stadtwerke Bremen to safeguard competition. E.On is still required to sell its stakes in water company Gelsenwasser and electricity company EWE.
Shares owned by Ruhrgas in east German gas venture VNG also have to be sold, and Ruhrgas is required to auction 200 billion kilowatt-hours of gas in six yearly auctions to its competitors starting in October 2003.
E.On chief executive Ulrich Hartmann said in a statement on the company's official website that he accepted the conditions after some hesitation. The requirements came "very close to the limit of what is economically tolerable.''
Ruhrgas must comply with the the new conditions and sell its stakes.
Under the earlier conditions, Ruhrgas was not required to sell its stakes in Bayerngas and Stadtwerke Bremen, and was only asked to auction 75 billion kilowatt-hours of gas.
The Düsseldorf court, with which several rival companies had filed a complaint, ruled last month that the ministry's first decision was unlawful because of procedural flaws.
Two rival energy suppliers, Berlin-based Ampere and Aachen-based Trianel, submitted an emergency application to the court for a review of the take-over's legal basis. The two smaller companies claimed they would suffer a considerable competitive disadvantage if the E.On – Ruhrgas merger went through.
The Economics Ministry responded by holding new hearings on September 5 and revising the conditions of the deal.
Rival companies vow to fight on in court
E.On and Ruhrgas competitors warned that they will maintain their challenge to the deal before the Düsseldorf court.
"Most likely we will ask the court to reiterate its temporary injunction against the E.On - Ruhrgas deal and argue that it also applies to the new ministerial injunction," says Stefanie Neveling at Becker Büttner Held, adviser to Trianel.
The opponents argue that the deal would kill competition on the German gas markets. Foreign companies argue that the merger would prevent them from operating in the German market.
Ruhrgas is Germany's biggest importer via its long-term contracts with the world's largest gas producer, Russia's Gazprom, in which Ruhrgas owns a 4 percent stake.