RWE agrees $7 billion Innogy bid

March 22, 2002 Posted: 3:24 AM EST

On the aquisistion trail: RWE has its headquarters in Essen, Germany

FRANKFURT, Germany (CNN) – German water company RWE agreed on Friday to buy Innogy, the UK's biggest electricity retailer, for £5.2 billion ($7.4 billion).

RWE (FRWE) is offering 275 pence in cash per Innogy (IOG) share and will assume debts of 2.1 billion pounds. The deal will make RWE the biggest supplier of power and water in Britain.

Britain's utility market was the first in Europe to open up to competition and is undergoing an overhaul after U.S. energy companies, which dominated takeover activity, pulled out to raise extra cash.

RWE, the world's third-largest water company, which agreed last September to buy U.S. water utility American Water Works for $4.6 billion plus $3 billion of debt, has been on the acquisition trail since the German market was liberalised in 1998.

Growth in competition led to lower power prices, so it acquired Britain's Thames Water for $9.8 billion two years ago.

Now Germany's second-largest utility has a 5 billion euro war chest and has said in the past it is keen to make acquisitions in the UK and Spain.

RWE's offer for Innogy represents a 31 percent premium over Innogy's closing price on February 15 when Innogy announced it was talking to interested buyers. Innogy stock rose 1 percent to 270.5 pence in early London trading on Friday, while RWE slipped 0.5 percent to 43.10 euros in Frankfurt.

Buying Innogy, a major power generator and retailer through its NPower brand, would allow RWE to sell electricity and gas to customers of Thames Water and water to Innogy customers, which number around seven million making it the largest UK electricity supplier to homes and number two in gas.

RWE's arch rival E.ON agreed last year to buy Britain's Powergen for 8.2 billion euros, making it Europe's second-largest listed power group behind Italy's Enel.

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