(Bloomberg Gadfly) -- Fortum Oyj has cornered Uniper SE's management and ordinary shareholders. The Finnish power generator suggests that its deal to buy 47 percent of its German peer from E.ON SE is friendly. However welcome to E.ON, Uniper's other shareholders will be less than thrilled.
The price is as mooted last week: 22 euros a share in cash, valuing E.ON's stake at 3.8 billion euros ($4.5 billion) and the whole of Uniper's equity at 8.1 billion euros. The same offer is available to all Fortum shareholders. The premium of 36 percent to the undisturbed price is pretty humdrum as takeovers go. But investors can forget about this being the start of an auction. It's a case of take it or accept a future with Fortum in the driving seat.
E.ON has agreed to a colossal break fee. With antitrust issues negligible, it's all but guaranteed that Fortum will obtain the E.ON stake. The German group has agreed to pay Fortum "at least" 20 percent of the deal value -- 750 million euros -- if for some reason it doesn't sell its stake to the Finnish bidder. The “at least” implies some kind of ratchet based on Uniper's share price, linking the break fee to the value of any rival bid.
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A gatecrasher, whether coveting all of Uniper or just E.ON's stake, knows it will have to offer a price high enough to cover E.ON's obligations. That almost certainly makes the whole thing too costly for a counter-bidder to entertain.
Uniper's management has yet to formally opine on the deal. But it has vigorously opposed Fortum's advances so far, rejecting a full takeover approach in July and dubbing the E.ON stake purchase hostile while it was being negotiated. Uniper can complain all it likes but finding an alternative deal looks pretty hard.
What's more, E.ON has undermined Uniper's defense against the bid by singing Fortum's praises as a responsible strategic partner and endorsing the view that the businesses are a good fit.
E.ON may be criticized for putting its own interests ahead of other shareholders. But why shouldn't it? It has a buyer on the hook at what was, last week, a record price that's more than double the value of Uniper when it was spun off last year.
There's only one place a raised offer could come from: Fortum itself. The snag is Fortum has no reason to pay up. It has E.ON's stake in the bag and may well grab an additional 4 percent in the offer to get to slightly higher than 50 percent, giving it control. But it's a long shot.
If Uniper's other shareholders don't tender, Fortum is still left with a lucrative dividend stream and a block on other potential owners. Fortum's net debt rises above a self imposed target so the group can take its time paying down its borrowings before making another offer to the independent shareholders in a year's time.
It's theoretically possible that Uniper management could declare the price of a board recommendation is just a few euros more and for Fortum to oblige. That would give Fortum full control in the here and now. Fortum clearly aspires to full ownership, and there would be value in tying this up in one go. That gives Uniper some small leverage to keep fighting.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net.
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