This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

RWE Sells DEA Unit To Russian Billionaire For $7B

Leading German electricity utility RWE has agreed to sell its RWE DEA oil and gas unit to an oil and telecoms investment vehicle led by Russian billionaire Mikhail Fridman for an enterprise value of 5.1 billion euros ($7.1 billion).

The purchase by LetterOne Holding SA is the first significant acquisition since Fridman and five partners established the vehicle with some of the $14 billion they received from the sale of a stake in TNK-BP Ltd. to OAO Rosneft.

For Essen-based RWE, the deal is a means to free itself from further investment in the exploration and production operation and raises cash to pay down 30.1 billion euros of debt. Those loans have become increasingly onerous as the company's valuation has slid almost 60% since the end of 2009.

Slumping wholesale power prices on the continent have hurt energy utilities in both Germany and France, leading to asset write-offs and sales. RWE earlier this month posted its first annual net loss in more than six decades after writing off nearly 5 billion euros in assets. France's No. 2 energy utility, GDF Suez SA, wrote off 15 billion euros of assets at the end of February.

Must Read: Vodafone To Buy Ono For $10B

The agreement for DEA is at the top end of an expected price fork of between 3.5 billion euros and 5 billion euros. Luxembourg-based LetterOne submitted its offer earlier this month as part of an auction that also attracted interest from a consortium of Kohlberg Kravis Roberts & Co. and Kuwait Petroleum Corp., BASF SE's Wintershall oil and gas exploration unit and Hungarian oil and gas group MOL Hungarian Oil and Gas plc.

RWE said on Sunday, March 16, that it had agreed on the broad terms of the sale and was working to "clarify further details shortly in order to enter into the sales and purchase agreement."

The deal comes at a tense moment in German and Russian relations following Russia's decision to deploy troops in the Crimean Peninsular of Ukraine. Germany's government had led the European Union's failed effort to negotiate Russia's exit from the region, and on Monday it joined Paris and London in insisting that Russia should face economic sanctions following the Crimean parliament's decision to declare independence and apply to become part of the Russian Federation.

Germany, which is heavily dependent on Russia for natural gas supplies, had earlier resisted calls for sanctions but has changed its position in recent days. EU leaders are due to meet Monday to discuss possible measures. Germany's Bild newspaper reported March 14 that the sanctions were likely to include travel bans on Russian energy executives, including OAO Gazprom CEO Alexey Miller, and Igor Sechin, who heads Rosneft.

DEA's enterprise value of 5.1 billion euros includes about 600 million euros of liabilities that will be assumed by LetterOne. The transaction needs approval from RWE's board and regulators in several countries, said RWE.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
TSLA $162.60 0.00%
YHOO $27.97 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs