Innogy agrees to German takeover

The board of the UK's largest electricity retailer has agreed to a £3.1bn takeover bid from Germany utility RWE.

The tie-up continues a trend that has seen many British gas and electricity sellers snapped up by European competitors in recent years.

The 275 pence per share deal will cost RWE a total of £5.5bn ($7.8bn).

Swindon-based Innogy was formerly part of National Power and includes the brands Yorkshire Power, Northern Electric and Npower.

Over half of the power-generating capacity of the UK will be in foreign hands following the takeover of Innogy.

Super-powers

Many European utilities have been on the acquisition trail in recent years, faced with the prospect of losing market share in their domestic market due to increased competition.

The UK's power industry was privatised in 1989-1990 in a deliberately fragmented structure aimed at creating competition.

RWE already owns Thames Water, the UK's largest water and sewerage company, for which it paid £4.3bn last year.

RWE's rival utility, E.On, is on the verge of completing a takeover of Powergen.

And France's EdF also owns a chunk of two regional electricity businesses - London electricity and South West electricity.

Competition fears

The deal is still subject to regulatory approval.

EdF, E.On and RWE have been steadily becoming a new league of super-utilities, despite some eyebrows raised over competition concerns.

"The European electricity market has consolidated extremely rapidly...this process has gone on with serious benign neglect from the Commission, Dieter Helm, director of UK consultancy Oxera, told a conference in Amsterdam earlier this week.

RWE investors have been cautious about the deal, and will be seeking an explanation behind the financial logic of the deal on Friday.