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Business

Path Cleared for E.On, Ruhrgas Merger

German utility giant E.On reached an out-of-court settlement with nine competitors who had sought a legal injunction against the company’s planned €10 billion ($10.8 billion) takeover of natural gas provider Ruhrgas.

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Merger in sight: utility giant E.On and gas heavyweight Ruhrgas

The far-reaching deal reached on Friday now removes the final remaining hurdle for the merger of E.On and Ruhrgas.

In exchange, the nine companies removed their complaint from Düsseldorf’s higher regional court.

“This deal allows us to kickstart the expansion of our gas business, enabling us to compete effectively against other major European gas companies,” said E.On CEO Ulrich Hartmann. “Against this background, the commitments we have made to the opponents are reasonably bearable.”

Düsseldorf-based E.On is the world’s second-largest electric company, following only France’s state-run EDF in size. Based on energy revenues, E.On’s takeover of Ruhrgas, Germany’s leading natural gas provider, will make it the world’s largest energy company.

As part of the deal, E.On has agreed to pay six of the nine plaintiffs in the case €90 million ($96.65 million). But the company said the non-cash settlement will be paid for through a barter system – including gas and electricity supplies, giving away some of its facilities and interests, marketing subsidies as well as some cash benefits. The agreement followed days of negotiations between E.On and its competitors over ways to compensate for what would amount to competitive disadvantages for the companies.

E.On said it would take over the remaining shares of Ruhrgas from the company RAG by the end of the day Friday, thus taking over the controlling interest in the natural gas giant. E.On has also said it would seek to purchase shares of Ruhrgas owned by Shell, ExxonMobil and other companies.

Hard-fought battle draws to a close

E.On fought for more than two years to take control of Ruhrgas, and Friday’s surprise agreement came only one hour before the Düsseldorf court had been scheduled to issue its own ruling over whether or not the federal ministerial approval for the merger was valid. The court had previously issued a temporary injunction banning the Ruhrgas takeover, and observers say the court would likely have ruled against the merger despite the fact that Germany’s Economics Ministry twice approved the deal.

The deal also comes as a surprise for the Essen-based mining company RAG. The company will now swap its Ruhrgas shares with E.On for control of the world’s biggest specialty chemical-maker, Degussa.

On Friday, the Federation of German Consumer Organizations criticized the deal, calling it a “setback for fair competition and for consumers.” The consumer lobby said the deal could lead to the creation of an overly powerful juggernaut that could damage competition. And in the end, it said, consumers would be the ones who paid.