Allianz Moves To Reduce Eon Shareholding

Germany’s Allianz AG announced that it was considering reducing its holdings, estimated to be worth around $3.8 billion, in the German power company Eon to facilitate its acquisition of British utility company Powergen.

Allianz owns 10.2 percent of Eon’s shares as a result of its stakes in German utilities Veba and Viag, which merged last year. Powergen in turn owns Kentucky-based utility LG&E, and U.S. regulations prohibit “non-utility shareholders” from controlling more than 5 percent of any utility company.

The prohibition would also require the State Government of Bavaria to reduce its 5.56 percent holding in Eon.

Regulators have indicated that they would give Eon sufficient time to implement the regulatory requirements. This in turn gives Allianz time to prepare a plan to divest itself of the necessary proportion of Eon shares, and take advantage of the impending changes in German capital gains tax laws applicable to corporations, which are planned for next year.

It also gives Allianz an opportunity to further unwind its cross holding arrangements, and free up additional capital for investment in its core operations.