Fortum’s $3.45 Billion Sale May Speed Up Uniper Squeeze Out

Fortum Oyj’s sale of its stake in one of Europe’s biggest heating networks could help provide it with the funds needed to squeeze out the remaining investors in Uniper SE.

The Finnish utility said late Wednesday it had agreed to sell its 50% stake in Stockholm Exergi Holding AB to a group of investors, including APG and Alecta AB, for 29.5 billion kronor ($3.45 billion). The deal follows earlier disposals of its heat and grid assets in northern Europe to focus on everything from hydrogen to wind power in partnership with Uniper.

By the end of last year, Fortum had accumulated 76.1% of the shares in Uniper after a lengthy and fractious takeover battle fiercely resisted by the company’s management. It has since replaced Uniper’s top brass.

The transaction’s valuation “exceeded our expectations” and paves the way for a Uniper squeeze-out, Elchin Mammadov, an analyst at Bloomberg Intelligence, said in a note.

Fortum has previously ruled out any domination agreement or a squeeze-out until the end of this year. The Uniper acquisition has put its investment-grade credit rating at risk and the sale may also help it to pay off debt.

Asked about its plans for the funds, Fortum said its ambition is to “have a balance sheet that allows for access to capital markets in our capital intensive industry with a stable investment grade BBB” rating. It also targets a stable dividend increasing over time, and is therefore releasing capital and redeploying it into investments in clean energy and clean gas for “a much bigger growth trajectory,” Ingela Ulfves, vice president of investor relations, said by email.

The deal values the Stockholm Exergi at 71.9 billion kronor, the Finnish utility said in a statement on Wednesday. The transaction is expected to close by year end. Fortum expects to book a capital gain of about 2.4 billion euros ($2.8 billion) at closing.

“We view this deal as strategically sensible and take a positive view,” Juha Kinnunen, an analyst at Inderes, said in a note. “The sales price was very good. Stockholm Exergi is a very attractive investment for ESG-conscious institutional infrastructure investors.”

Just after taking over as Fortum’s chief executive officer last year, Markus Rauramo said the group’s business portfolio is set to be more focused in the future, with its main role as a provider of solutions as Europe transitions to cleaner ways to produce energy. By 2025, the company plans to invest 3 billion euros in expansion, mostly in renewables and carbon-free power generation.

Recent Disposals

The utility that’s more than half owned by the Finnish state has recently sold solar power plants in India, and district heating businesses in the Baltic region and in some Finnish cities. The strategic reviews of the heating and cooling businesses in Poland and the Consumer Solutions business are ongoing, it said.

Last year, Stockholm Exergi’s heating and cooling sales were 7.6 terawatt hours and power sales 0.7 terawatt hours, according to the statement. It generated 2.8 billion kronor in earnings before interest, tax, depreciation and amortization.

“We intend to grow the company by investing significant capital, targeting to enhance the environmental sustainability and efficiency of its heating plants and district heating networks,” Carlo Maddalena, senior portfolio manager at APG, said in the Fortum statement.

Fortum traded little changed after earlier rising more than 2%. Uniper gained 0.5%.

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