E.ON AG
22 November 2005
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO
CANADA, AUSTRALIA OR JAPAN.
22 November, 2005
E.ON AG ('E.ON')
Cessation of Discussions with Scottish Power plc ('Scottish Power')
Introduction
On 5 September, 2005, E.ON announced that it was considering its options
regarding a possible takeover offer for Scottish Power. A number of discussions
between E.ON and Scottish Power subsequently took place and a proposal was made
to the Board of Scottish Power regarding a possible all cash acquisition of
Scottish Power by E.ON.
The proposal envisaged a cash acquisition by E.ON of Scottish Power at a price
of 570 pence per Scottish Power Share. In addition, Scottish Power shareholders
would have received ordinary dividends in accordance with Scottish Power's
existing dividend policy during the period until closing. Any other return of
cash, special dividend or other distribution declared, paid or made by Scottish
Power to shareholders on or after the date of this statement would have reduced
the price set out above by a corresponding amount.
E.ON's proposal also required: (i) the disposal of PacifiCorp to MidAmerican
(announced on 24 May, 2005) to close before E.ON acquired Scottish Power; (ii)
the receipt of appropriate regulatory clearances; and (iii) the unanimous
recommendation of the terms of the proposed transaction by the Board of Scottish
Power.
E.ON has been informed by the Board of Scottish Power that it did not wish to
take E.ON's proposal forward and will neither recommend E.ON's proposal to its
shareholders nor grant E.ON due diligence access.
Accordingly, and subject to the matters set out in 'other matters' below, E.ON
confirms that it will not be making an offer for Scottish Power and discussions
with Scottish Power have ceased.
E.ON's proposal to Scottish Power
In its announcement of 5 September, 2005, E.ON noted the very strong rise in
Scottish Power's share price since Scottish Power announced its intended
disposal of PacifiCorp. E.ON stated that it considered that Scottish Power's
share price at that time already reflected a substantial element of bid
speculation. E.ON's analysis of what it considers to be a fair value for
Scottish Power has strongly underpinned this view which was reflected in the
proposal made to Scottish Power. E.ON would only proceed with an acquisition of
Scottish Power if it believed it could create value for its own shareholders.
E.ON's proposal valued the whole of Scottish Power's share capital at
approximately £11.3 billion (assuming the exercise in full of all outstanding
options under the Scottish Power Share Option Schemes and the conversion in full
into Scottish Power Shares of the Scottish Power Convertible Bonds (note A)).
The consideration payable to Scottish Power shareholders would have been
approximately equivalent to the middle market price of 569 pence per Scottish
Power Share at the close of business on 21 November, 2005, being the last
practicable date before the making of this announcement, and would have
represented a premium of approximately:
- 47% over the middle market price of 386.5 pence per Scottish Power Share at the close of
business on 30 November, 2004, being the lowest price at which Scottish Power Shares have closed
in the 12 months prior to the date of this announcement;
- 29% over the middle market price of 442 pence per Scottish Power Share at the close of business
on 23 May, 2005, being the day prior to the announcement of the PacifiCorp disposal; and
- 9% over the middle market price of 525 pence per Scottish Power Share at the close of business
on 2 September, 2005, being the last trading day before the day of the announcement that E.ON
was considering its options regarding a possible acquisition of Scottish Power, at which point
E.ON believed that Scottish Power's share price already reflected a substantial element of bid
speculation.
Dr. Wulf H. Bernotat, Chairman of the Board of Management and CEO of E.ON, said:
'We are surprised and disappointed that Scottish Power has chosen to react to
our proposal in this way. We had worked hard to put forward a proposal that
would have been fair and attractive to the shareholders of both Scottish Power
and E.ON. There is a compelling industrial logic to a combination of E.ON's UK
business with Scottish Power; it would have been good for customers and
shareholders alike.'
Other matters
As a consequence of this statement, the City Code prohibits E.ON from, inter
alia, announcing an offer or possible offer for Scottish Power within six months
of today's date unless there is a material change of circumstances or there has
occurred an event which E.ON has specified in this statement as an event which
would enable the statement to be put aside. Accordingly, E.ON reserves the right
to announce an offer or possible offer for Scottish Power and/or to take any
other action which would otherwise be restricted under Rule 2.8 of the City Code
within six months of the date of this statement in the event that either:
(i) the Board of Scottish Power agrees to the making of such an announcement or the taking of such
action; or
(ii) there is an announcement of a third party offer or possible offer for Scottish Power; or
(iii) Scottish Power undertakes or announces an intention to undertake any acquisition or disposal of
a material amount (where 'material amount' is as defined in Note 2 on Rule 21.1 of the City
Code) or any material recapitalisation other than the previously announced proposed return to
shareholders of up to £2.5 billion from the proceeds of the sale of PacifiCorp (where 'material'
is defined as 10% or more of Scottish Power's equity market capitalisation as at the close of
business on the date of this announcement); or
(iv) Scottish Power or a third party announces a 'whitewash' proposal (as described in Rule 9 of the
City Code) or a reverse takeover (as set out in Note 2 to Rule 3.2 of the City Code) in respect
of Scottish Power; or
(v) an announcement is made of a transaction or possible transaction between two or more of the
principal businesses (note B) involved in the generation, distribution or supply of electricity
or the supply of gas in Great Britain which would give rise to a concentration falling within
the scope of Council Regulation (EC) 139 / 2004 (as amended) or a relevant merger situation as
defined for the purposes of Part 3 of the Enterprise Act 2002.
If E.ON announces an offer or possible offer for Scottish Power after three
months from the date of this statement, it reserves the right to do so at any
price. If it announces an offer or possible offer within three months of the
date of this statement, it reserves the right to do so at a price less than 570
pence per Scottish Power Share, less any return of cash, dividend (other than
ordinary dividends declared, paid or made in accordance with Scottish Power's
existing dividend policy) or other distribution declared, paid or made by
Scottish Power on or after the date of this statement, in the event that either:
(i) it is recommended by the Board of Scottish Power; or (ii) there is an
announcement of a third party offer or possible offer for Scottish Power at a
lower price.
Note A - Based on: (i) outstanding Scottish Power Shares of 1,871,380,963 on 17
November, 2005 as disclosed by Scottish Power; (ii) 35,119,000 options
outstanding under the Scottish Power Share Option Schemes net of 25,097,000
Scottish Power Shares held in trust as disclosed in Scottish Power's 2005 annual
report; and (iii) 103,155,193 Scottish Power Shares to be issued upon conversion
of the Scottish Power Convertible Bonds using the conversion price of 404.5
pence applicable on or before 10 July, 2006.
Note B - For the purpose of this clause, these principal businesses (whether
acting themselves or through a subsidiary undertaking) are as follows: (i) in
electricity generation in Great Britain: British Energy Group plc, Centrica plc,
Drax Group Limited, EdF Group SA, International Power Plc, RWE AG, Scottish
Power and Scottish & Southern Energy plc; (ii) in electricity supply in Great
Britain: British Energy Group plc, Centrica plc, EdF Group SA, Gaz de France SA,
RWE AG, Scottish Power and Scottish & Southern Energy plc; (iii) in electricity
distribution in Great Britain: MidAmerican, EdF Group SA, Scottish Power,
Scottish & Southern Energy plc, United Utilities Plc and Western Power
Distribution Holdings Limited; and (iv) in gas supply in Great Britain: Centrica
plc, EdF Group SA, Royal Dutch Shell plc, RWE AG, Scottish Power, Scottish &
Southern Energy plc and Total SA.
Enquiries:
E.ON AG Peter Blau +49 211 457 9627
Media Relations: Josef Nelles +49 211 457 9544
E.ON UK Jonathan Smith +44 24 7642 5741
Media Relations: Clare Harbord +44 24 7642 5367
E.ON AG Kiran Bhojani +49 211 457 9542
Investor Relations:
Lazard (financial adviser to Peter Kiernan +44 20 7187 2000
E.ON): Trevor Nash
Matthew Jarman
Brunswick Group LLP: Mike Smith +44 20 7404 5959
Simon Holberton
Lazard, which is regulated in the United Kingdom by the Financial Services
Authority, is acting for E.ON and no one else in connection with the possible
acquisition of Scottish Power and will not be responsible to anyone other than
E.ON for providing the protections afforded to clients of Lazard nor for
providing advice in relation to the possible acquisition of Scottish Power.
DEFINITIONS
In this announcement, the following definitions apply, unless the context
otherwise requires:
'City Code' The City Code on Takeovers and Mergers
'E.ON' E.ON AG, a company incorporated in Germany and registered in the commercial
register of Dusseldorf with registration number HRB22315 and whose registered
office is at E.ONplatz 1, D-40479 Dusseldorf, Germany
'MidAmerican' MidAmerican Energy Holdings Company
'PacifiCorp' PacifiCorp Holdings Inc
'Scottish Power' Scottish Power plc, a company incorporated in Scotland with registered number
193794 and whose registered office is at 1 Atlantic Quay, Glasgow G2 8SP,
Scotland
'Scottish Power the 4.00 per cent. Step-up Subordinated Guaranteed Convertible Bonds issued by
Convertible Bonds' Scottish Power Finance (Jersey) Limited and guaranteed by Scottish Power
'Scottish Power Share the Scottish Power Long Term Incentive Plan, the Scottish Power Executive
Option Schemes' Share Option Plan 2001, the Scottish Power Sharesave Scheme, the Scottish
Power Share Incentive Plan and any other arrangement involving the employees
or former employees of the Scottish Power Group in the capital of Scottish
Power
'Scottish Power Shares' ordinary shares of 50 pence each in the capital of Scottish Power
'Takeover Panel' The Panel on Takeovers and Mergers
This information is provided by RNS
The company news service from the London Stock Exchange