Eon/Ruhrgas and Eon/Endesa: A comparative analysis

1
Eon/Ruhrgas and Eon/Endesa A comparative analysis

• The Legitimacy of the Change of Control clause

2
EONS TAKEOVER OF RUHRGAS

• 15 August 2001 Eons application to Federal
  Cartel Office, FCO
• 17 January 2002 FCOs prohibition of merger on
  the grounds that the merger would strengthen
  Eons dominant position on the gas and
  electricity market to a serious extent, section
  36 (1) of the Act against Restraints of
  Competition (GWB)
• 15 February 2002 Eons application for
  Ministerial Authorization according to section 42
  (1) GWB
• 21 May 2002 Negative appraisal of intended
  merger by Monopolies Commission
• 5 July 2002 Issue of Ministerial Authorization
  by Ministry of Economics because the restraint
  of competition is outweighed by advantages to the
  economy as a whole and an overwhelming public
  interest, section 42 (1) GWB

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The Ministrys conditions imposed on Eon

• Downstream Distribution Eon was to sell shares
  of its subsidiaries VNG, SWB, EWE and Bayerngas
• Gas Release-Program Ruhrgas was to sell 200
  billions kWh
• Change of Control clause The Ministry is
  allowed to veto any foreign takeover of Eon if it
  gives rise to the assumption that German gas
  supplies are put at risk. In this case, Eon is
  forced to sell Ruhrgas to a third party subject
  to the Ministrys permission. The permission can
  only be denied if national energy interests are
  at stake. It is considered to have been issued if
  the Ministry does not react to a notification
  within a month.

4
Justification for the Change of Control clause

• The clause falls under the definition of Article
  21 (4) of the Merger Regulation because it is an
  appropriate measure to protect legitimate
  national interests.
• In 2002 the ICJ held comparable rules by Belgium
  to be valid (C-503/99). It described Belgiums
  golden share in gas distribution business
  Distrigaz as a legitimate measure to promote the
  national interest the supply of gas in an
  emergency.
• According to the Court, a golden share can be
  justified if the objective pursued
• falls within the ambit of a general strategic
  interest
• and the measures prescribed are based on precise
  criteria which are known in advance, are open to
  review by the courts and
• cannot be attained by less restrictive measures.

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Principle of Proportionality

• The change of control clause constitutes an
  appropriate means to provide for security of
  supply.
• It is a necessary means to guarantee security of
  supply. The objective cannot be attained by a
  less restrictive measure.
• The clause is a proportionate means because it
  acts as a safeguard for legitimate national
  interests.