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Business

Mega-merger in the making?

Germany’s energy giant E.ON is pulling no punches in its quest to take over Europe’s largest gas utility Ruhrgas. The group said it will apply for ministerial approval to override Monday’s cartel office decision.

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E.ON sizing up Ruhrgas

The cartel office said it had blocked the purchase by E.ON of British Petroleum's 25.5 percent stake in Ruhrgas, because Eon would dominate the German gas market and restrict competition in electricity.

Now, E.ON is putting its money on Germany’s Federal Economics Minister, Werner Müller, who has the power to override the cartel office decision.

Müller confirmed that he had had talks with E.ON, but had not yet reached a decision on E.ON’s purchase of Ruhrgas, which has a 60 percent stake in the German gas market and is one of the biggest gas suppliers in the world.

But before Müller can give the go-ahead, the German Monopolies Commission must be consulted. And they are sceptical of the deal.

The overall benefits of the deal to the German consumer are not clear, Jürgen Basedow, a member of the Monopolies Commission said in an interview with the Berlin daily Berliner Morgenpost.

"What is in it for Germany? Will more jobs be created as a result of the merger? Will we increase our tax revenue? These are relevant issues, according to Basedow. Personally, he is sceptical the deal will go through.

The government, however, is understood to be sympathetic to E.ON's case, believing it would help to give Germany an energy company capable of competing with similar-size rivals in Europe.

E.ON became Europe’s largest energy group following the mega-merger of Veba and Viag in 2000. Having sold off various parts of the merged companies, E.ON has 50 billion euros at its disposal.

E.ON argues that strong European competitors such as Gaz de France and Enel of Italy are a potential threat to their position and that it is merely establishing a level playing field in Europe.

"This step significantly strengthens Ruhrgas's position in the European landscape. It will contribute significantly in securing Germany's long-term gas supply and jobs in the German gas industry," an E.ON spokesman told the Berliner Morgenpost.