E.ON’s capital stock amounts to €1,799,200,000.00, and is represented by 692,000,000 issued ordinary shares without par value, with each share representing €2.60 of the capital stock.
E.ON’s ordinary shares are listed on all seven German stock exchanges (Frankfurt, Berlin-Bremen, Düsseldorf, Hamburg, Hannover, Munich and Stuttgart), with its principal trading market being the Frankfurt Stock Exchange, together with XETRA (Exchange Electronic Trading System). Options on ordinary shares are traded on the German derivatives exchange (Eurex Deutschland). In addition, E.ON American depositary shares are listed on the NYSE under the symbol ‘‘EON’’ and are evidenced by E.ON American depositary receipts.
In 2005, the E.ON group’s core energy business was organized into the following separate market units: Central Europe, Pan-European Gas, U.K., Nordic and U.S. Midwest, as well as the Corporate Center.
services, as well as off-system sales. E.ON U.S.’s power generation and retail electricity and gas services are located principally in Kentucky, with a small customer base in Virginia and Tennessee. E.ON U.S. owns interests in and operates power stations with a total installed capacity of approximately 8,300 MW, of which its attributable share is approximately 7,700 MW (not including mothballed and shutdown power plants). In 2005, the U.S. Midwest market unit recorded 3.6 percent of E.ON’s revenues.
Corporate Center. The Corporate Center consists of E.ON AG itself, equity interests managed directly by E.ON AG, including its remaining telecommunications interests, and consolidation effects at the group level, including the elimination of intersegment sales.
E.ON is a ‘‘foreign private issuer’’ as defined in Rule 3b-4(c) of the Exchange Act. E.ON’s ordinary shares and ADSs are registered pursuant to Section 12(b) of the Exchange Act. E.ON is subject to the periodic reporting requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports and other information with the SEC relating to its business, financial condition and other matters. Such reports and other information are available to the public on the SEC’s Internet site (http://www.sec.gov).
14. Background of the Offers; Contacts with Endesa.
Background.
On September 5, 2005, Gas Natural announced its intent to commence a tender offer for all the capital stock of Endesa. Since then, E.ON and Endesa have had a number of contacts to discuss possible courses of action with respect to Gas Natural’s tender offer. E.ON and Endesa entered into a confidentiality agreement on January 16, 2006, and, on the basis of that confidentiality agreement, E.ON has conducted a limited due diligence review of operational, financial and legal matters regarding Endesa.
Except for the confidentiality agreement referred to above, neither E.ON nor E.ON 12 have reached any agreement with Endesa, the members of the board of directors of Endesa or any shareholder of Endesa in connection with the Offers.
Contacts with Endesa.
In September and October 2005, Dr. Dierk Paskert, Senior Vice President of Corporate Development of E.ON, contacted Citigroup and Deutsche Bank, who are advisors to Endesa with respect to the offer from Gas Natural, regarding E.ON’s preparedness to discuss the possibility of E.ON making an offer for the capital stock of Endesa, if and when appropriate.
On December 1, 2005, Dr. Wulf H. Bernotat, Chief Executive Officer and Chairman of E.ON, Mr. Rafael Miranda Robredo, Chief Executive Officer of Endesa, and their respective representatives held a meeting in Essen, Germany, to discuss various options with respect to Gas Natural’s proposed offer for Endesa, including the possibility of E.ON making an offer for Endesa.
On January 5, 2006, Dr. Bernotat and other representatives of E.ON met again with Mr. Miranda and others of Endesa in Madrid, Spain to continue discussing the same matters. On January 9, 2006, Dr. Bernotat and Mr. Miranda had a telephone conversation, during which they discussed further the possibility of E.ON making an offer for Endesa.
On January 16, 2006, E.ON and Endesa entered into a confidentiality agreement.
On January 25, 2006, representatives of E.ON and Endesa met in Munich, Germany, and E.ON conducted a limited due diligence review of operational, financial and legal matters regarding Endesa. On February 1, 2006, representatives of E.ON met again with Endesa in Madrid, Spain, to continue the due diligence review.
On February 3, 2006, Dr. Bernotat and Mr. Miranda discussed in a telephone conversation the possible timing and process of a potential offer by E.ON for Endesa. On February 9, 2006, Dr. Bernotat, Mr. Miranda and other representatives of E.ON and Endesa met again in Paris, France, to further discuss details of the potential offer.
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In the period immediately before the announcement of E.ON’s offer for Endesa, several telephone conversations took place between Dr. Bernotat, Mr. Miranda or, almost on a daily basis, other representatives of E.ON and Endesa. On February 20, 2006, immediately prior to the filing on February 21, 2006, of E.ON’s offer document for approval by the CNMV, Dr. Bernotat informed Mr. Miranda of the filing. On the same day, E.ON announced its intention to make an offer to acquire all the outstanding shares of Endesa.
On February 21, 2006, after the filing of E.ON 12’s application for approval of its offer with the CNMV, Dr. Bernotat and Mr. Pizarro, Chairman of Endesa, discussed in a telephone conversation the next steps of the Spanish Offer.
On March 3, 2006, Dr. Bernotat and Mr. Miranda met in Madrid in order to further discuss the development of the Spanish Offer. Also on that date, representatives of E.ON and Endesa met in order to discuss the implications of the Royal Decree-Law 4/2006, enacted on February 28, 2006, that required E.ON to file with the Spanish National Commission for Energy (Comisión Nacional de Energía) an application for authorization of E.ON’s Spanish Offer.
Representatives of Endesa and E.ON met in Madrid on March 17, 2006, April 19, 2006, May 22, 2006, June 19, 2006, August 1, 2006, September 1, 2006, September 6, 2006, September 28, 2006, October 10, 2006 and November 6, 2006, in Munich on May 18, 2006, and in Essen on July 13, 2006, in order to further discuss the Offers including, on several occasions, the implications of the Royal Decree-Law 4/2006 referred to above. Mr. Pizarro participated in the meeting on October 10, 2006.
On June 7, 2006, representatives of E.ON and Endesa met in Madrid in order to discuss Endesa’s quarterly results. On July 10, 2006, Dr. Bernotat and Mr. Miranda discussed the Offers by telephone.
On July 11, 2006, representatives of E.ON and Endesa met in Madrid in order to discuss procedures regarding the Spanish National Commission for Energy (Comisión Nacional de Energía) (which is referred to as the ‘‘CNE’’). On July 25, 2006, Dr. Bernotat, Mr. Miranda and other representatives of E.ON and Endesa met in Madrid in order to discuss the results of the first two quarters of the year 2006. On September 13, 2006, representatives of E.ON and Endesa met in Madrid in order to discuss corporate governance issues. On October 26, 2006, representatives of E.ON and Endesa held a follow-up meeting in Madrid in order to discuss the Offers. In addition, representatives of Endesa and legal counsel of E.ON met in Madrid on several occasions in order to discuss the Offers.
On August 21, 2006, representatives of E.ON and Endesa met in Madrid in order to discuss communication measures regarding the conditions to the Offers, that had been imposed by the CNE.
On September 6, 2006, Dr. Bernotat and Mr. Miranda generally discussed the possible transitioning of Dr. Bernotat to the chairman position after 12 to 18 months following any successful acquisition of Endesa by E.ON. No agreement or understanding between the participants was reached. During the same meeting, Dr. Bernotat indicated to Mr. Miranda that, in the event E.ON acquired Endesa, E.ON wished certain members of the current management to remain in their current position. No agreement or understanding has been reached as to Mr. Miranda’s continued employment in such circumstance.
During the meeting on October 10, 2006, between representatives of Endesa and E.ON, discussions were conducted during which representatives of Endesa expressed Endesa’s satisfaction with E.ON’s decision to increase the offer price to €35.00 for Endesa.
On November 22, 2006, representatives of E.ON and Endesa met in Madrid in order to further discuss the Offers.
In addition to the contacts described above, after the announcement of the Spanish Offer, several telephone conversations on an ongoing basis have taken place between representatives of E.ON and Endesa regarding various matters relating to the Offers.
Contacts with significant shareholders of Endesa.
On March 15, 2006, representatives of E.ON and Caja Madrid held a meeting in Düsseldorf to discuss the Offers. On September 28, 2006, Dr. Bernotat, Mr. Miguel Blesa and other representatives
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of E.ON and Caja Madrid held a meeting in Madrid to discuss the Offers. On October 13, 2006, Dr. Bernotat and Mr. Miguel Blesa discussed the Offers by telephone.
On September 28, in Madrid, and on October 10, 2006, by telephone, Dr. Bernotat, and Mr. Entrecanales, Chairman of Acciona, discussed the Offers and Acciona’s intentions with respect to Endesa. In late December 2006 and early January 2007, representatives of E.ON and Acciona met to discuss the Offers and the terms under which Acciona would agree to support the Offers and to vote in favor of the amendments to Endesa’s articles of association. No agreement or understanding was reached.
15. Purpose of the Offers; Plans for the Company; Certain Conditions.
General.
The purpose of E.ON 12’s Offers is to acquire all the outstanding ordinary shares and ADSs of Endesa and obtain control of Endesa. E.ON’s business purpose for the acquisition of Endesa is, among other things, to consolidate E.ON’s business presence in the main countries of the European Union.
E.ON aims to operate the businesses of E.ON and Endesa as a complementary portfolio of assets, and execute them on a strategic business model designed to deliver value to both companies. Accordingly, E.ON has no plan to merge Endesa or any of the Endesa group of companies with E.ON 12 or any of the companies in the E.ON group, dissolve Endesa or any of the Endesa group of companies or to effect any significant reorganization of the Endesa group. It is E.ON’s intention for Endesa to be responsible for managing a new market unit of the E.ON group based in Madrid, that will be responsible for Southern Europe and Latin America. E.ON 12’s Offers are not being made for the purpose of generating synergies. E.ON believes that the acquisition of Endesa will be profitable whether or not there are specific cost savings, that are realized as a result of the acquisition of Endesa. As of the date of this Offer to Purchase, E.ON 12 is unable to quantify synergies or cost savings, if any, resulting from the acquisition of Endesa.
E.ON has emphasized the importance of creating leading market positions as a key source of competitive advantage, both by creating economies of scale to reduce costs and by managing volatile commodity markets to reduce risks. E.ON believes that the Offers are fully in line with this strategy, as the acquisition of Endesa by E.ON would create a combined company with a competitive position (and sometimes a leading position) in Europe’s principal regional power markets. In strategic terms, this transaction is a major step forward for E.ON in delivering its vision to create the world’s leading power and gas company. The combination of E.ON and Endesa would:
 | | |
| • | broaden the dimensions of E.ON in Europe’s gas and power markets, given the positions of Endesa in Southern Europe; |
| | |
| • | add Endesa’s outstanding position in fast growing markets to E.ON’s strong asset portfolio; and |
| | |
| • | bring together two companies with the same vision of creating a leading integrated power and gas business, with the aim of investing for the long term to create value for both investors and customers. |
Taken together, E.ON and Endesa serve more than 50 million customers and operate in more than 30 countries with a staff of more than 107,000 employees in 2005. The aggregate sales for the two companies in 2005 amounted to 608,000 million kWh of power and 945,000 million kWh of gas. Total capacity of the combined company would be approximately 100,000 MW, and total energy production would exceed 520 terawatt hours.
Future activity of Endesa.
E.ON plans to maintain Endesa’s current business policy and strategy and to continue developing Endesa’s main business areas. The following is a brief description of E.ON’s plans with respect to
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Endesa, should E.ON obtain control over Endesa, with respect to the corporate and territorial organization of Endesa, Endesa’s assets, Endesa’s investment plan, the employment policy of Endesa and its indebtedness. These plans and the related commitments assumed by E.ON have been made in light of the current Spanish regulatory framework and may be altered in the event of a material change in that regulatory framework.
Corporate and territorial organization.
E.ON intends immediately to take full advantage of one of Endesa’s key areas of expertise, Endesa’s Centre for Excellence in Distribution based in Barcelona. E.ON intends to build this center into a Global Centre of Excellence which will serve as a key resource of the entire E.ON group of companies.
Plans with regard to Endesa’s assets.
As of the date of this Offer to Purchase, E.ON does not have any specific plans regarding the use or disposal of Endesa’s assets outside of the ordinary course of its business.
E.ON 12 is not planning to sell Endesa’s assets. To the contrary, Endesa may benefit from the transfer of additional assets from E.ON to Endesa. There is no material overlap in the activities of E.ON and Endesa (except in certain regions of Northern Italy) and there is no need to sell any assets of Endesa to finance the Offers. However, E.ON will ensure that Endesa’s business will stay inline with major business trends and may decide to sell assets of Endesa in the future, depending on the circumstances that exist at the time.
Endesa’s investment plan.
Endesa plans to invest a total of €14.6 billion under its existing 2005-2009 Investment Plan as follows:
| | | | | | |
| Endesa’s 2005 – 2009 Investment Plan (€€ billion) |
| Spain and Portugal | | | | | 10.3 | |
| Development of new power generation | | | | | 3.1 | |
| Renewables | | | | | 1.4 | |
| Maintenance investments | | | | | 5.8 | |
| Rest of Europe | | | | | 1.8 | |
| Development of new power generation | | | | | 1.4 | |
| Maintenance investments | | | | | 0.4 | |
| Latin America | | | | | 2.5 | |
| Development of new power generation | | | | | 0.5 | |
| Distribution and maintenance investments | | | | | 2.0 | |
| TOTAL | | | | | 14.6 | |
|
| |
| Source: Endesa (November 16, 2005) |
| |
| (1) | Of which 4.3 billion shall be assigned to the distribution network. Source: Presentation of Endesa, October 2005. |
E.ON intends to implement Endesa’s investment plan, including the €4.3 billion in planned distributions.
E.ON also intends to maintain the investments planned by Endesa in certain Spanish ‘‘strategic assets’’ that are wholly or partially owned by Endesa in order to keep those Spanish strategic assets operative, including:
| | |
| • | the regasification plants under construction by Reganosa (Mugardos, La Coruña), Sagunto (Valencia) and Gascan (Canary Islands); |
| | |
| • | the Medgaz pipeline (12%-owned by Endesa) that will provide a pipeline connection between Algeria and the Iberian Peninsula through Almería; |
| | |
| • | the electrical power transmission facilities belonging to Endesa; |
| | |
| • | the production, transmission and distribution facilities in the Balearic and Canary Islands and in the autonomous cities of Ceuta and Melilla; |
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| | |
| • | the thermal nuclear power plants; and |
| | |
| • | the thermal coal power plants of As Pontes, Compostilla and Teruel. |
Together with Endesa, E.ON intends to become a major competitor in the Spanish market and to participate in its development, including in opportunities for gas-power convergence. Investments will focus on Endesa’s ‘‘Advance in Capacity’’ plan, continuing Endesa’s investments in the construction of new combined cycle power stations, increased capacity in liquid natural gas and the development of renewable energies and thermo-electric activities.
E.ON believes that a key factor for a reliable future energy supply is access to global natural resources. Many of these resources are controlled by a handful of large suppliers. E.ON believes that the combination of strong international companies such as E.ON and Endesa will be able to counterbalance these upstream companies. E.ON expects that Spain will benefit from the joint sourcing of energy resources on a European level, including through E.ON’s relationship with Russian suppliers.
Employment policy.
E.ON does not plan any material change in connection with the employees or the management team of Endesa as a result of the Offers, except for the potential changes in Endesa’s governing bodies as described below. In particular, E.ON has no plans to reduce the employment levels of the companies in the Endesa group. E.ON may install certain engagement programs for key managers and a long-term incentive program. Endesa is expected to maintain its registered office and its board of directors in Spain.
Indebtedness.
As of the date of this Offer to Purchase, E.ON has no current intentions or specific plans to restructure Endesa’s existing indebtedness. However, E.ON may decide to restructure Endesa’s indebtedness at any time in the future, based on new information, then prevailing market conditions and the future development of the E.ON group. Furthermore, upon maturity of any tranche of Endesa’s indebtedness, E.ON will evaluate different possibilities for refinancing on a case-by-case basis, shareholder loans would then be taken into consideration.
Governing Bodies of Endesa.
Following settlement of the Offers, E.ON intends to adapt the composition of the board of directors of Endesa to reflect the new shareholder structure. In particular, E.ON, through E.ON 12, intends to be represented in the board of directors of Endesa and all of its committees, at least in proportion to its ownership of Endesa capital stock following the Offers. This means that E.ON intends to be represented on the board of directors of Endesa by more than one half of its members. Thus, E.ON intends to propose a change in the composition of the board of directors and the committees of Endesa and could also propose a change in the number of members of the board of directors of Endesa. However, as of the date of this Offer to Purchase, E.ON 12 has not made any specific decisions regarding this matter.
As long as Endesa remains a listed company in Spain, E.ON intends for Endesa to follow Spanish recommended corporate governance rules. E.ON intends for Endesa to maintain some independent members (consejeros independientes) of its board of directors, although the number of these independent directors will be reduced as a result of the appointment of directors by E.ON 12. E.ON 12 also intends for Endesa to maintain its audit and control, appointments and compensation and executive committees.
However, if E.ON 12 applies for delisting and deregistration of Endesa’s securities, the composition of the board of directors of Endesa would change, by replacing the independent directors (consejeros independientes) with directors appointed by Endesa’s shareholders (consejeros ejecutivos o dominicales).
Articles of Association of Endesa.
As of the date of this Offer to Purchase, E.ON 12 has no intention to amend the articles of association of Endesa other than with respect to articles 32 (‘‘Limits of voting rights’’), 37 (‘‘Number
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and classes of directors’’), 38 (‘‘Term of office’’), and 42 (‘‘Eligibility’’) of Endesa’s articles of association as described in Section 5 (‘‘Conditions to the U.S. Offer’’) of this Offer to Purchase.
In the event that E.ON 12 waives the conditions provided for in Section 5 (‘‘Conditions to the U.S. Offer’’) of this Offer to Purchase because the Endesa shareholders do not approve amending those articles of Endesa’s articles of association at the general shareholders’ meeting of Endesa prior to the expiration of the acceptance periods under the Offers or otherwise, E.ON anticipates that it would propose to amend such articles of Endesa’s articles of association following the settlement of the Offers.
Dividend policy of Endesa.
As of the date of this Offer to Purchase, E.ON 12 has not made any decisions in relation to the dividend policy of Endesa. In principle, Endesa’s future dividend policy would depend on future cash flow levels as well as future financing and investment needs. It will be Endesa’s board of directors that will determine the dividend policy of Endesa and E.ON will try to orientate such a policy to facilitate the fulfilment of the Endesa investment plan.
16. Source and Amount of Funds.
Assuming all of the outstanding Endesa securities are tendered into the Offers, E.ON 12 would, based on the offer price of €24.905 per ordinary share and per ADS, pay an aggregate amount of €26,368,221,473.89 in cash to the holders of the Endesa securities under the Offers, excluding any expenses incurred by the U.S. Tender Agent in converting the consideration into U.S. dollars in the U.S. Offer. This amount will be proportionately lower to the extent less than 100% of the outstanding Endesa securities are tendered into the Offers. The amount may also vary depending on the number of Endesa securities outstanding at the time of the closing of the Offers, and would be reduced if the offer price is reduced in the event that Endesa pays a dividend prior to the acceptance for payment of Endesa securities tendered under the U.S. Offer. The aggregate amount to be paid to holders of Endesa securities will be higher when E.ON 12 increases its offer price to at least €34.50 in cash for each ordinary share and each ADS.
E.ON 12 estimates that, based on the offer price of €24.905 per ordinary share and per ADS and assuming all of the outstanding Endesa securities are tendered into the Offers, the total amount of funds required to acquire the Endesa securities pursuant to the Offers and to pay the related fees and expenses will be approximately €300 million, including €240 million in financing costs. See Section 20 (‘‘Certain Fees and Expenses’’) of this Offer to Purchase.
Facility Agreement.
In order to finance the Offers, E.ON, as borrower, entered on February 20, 2006, into an euro syndicated term and guarantee facility agreement with HSBC Bank plc, Citigroup Global Markets Limited, J.P. Morgan plc and Deutsche Bank AG for a total amount of €32 billion.
As a result of the announcement by E.ON of the increase of the offer price on September 26, 2006, the financing of the Offers was renegotiated, and a new Euro syndicated term and guarantee facility agreement dated October 16, 2006 (which is referred to as the ‘‘Facility Agreement’’) for a total amount of €37.1 billion, was entered into by E.ON as borrower and HSBC Bank plc, Citigroup Global Markets Limited, J.P. Morgan plc, BNP Paribas, The Royal Bank of Scotland plc and Deutsche Bank AG, acting as mandated lead arrangers (which are referred to as the ‘‘Mandated Lead Arrangers’’).
E.ON will provide to E.ON 12 the funds that are obtained under the Facility Agreement, as well as any other funds which may be used in the Offers, through intra-group loan agreements or capital contribution. E.ON will ensure that E.ON 12 is duly financed and capitalized at all times.
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Below is a description of the material terms and conditions of the Facility Agreement.
Amount and maturity of the facility.
The amount of financing made available under the Facility Agreement is up to € 37.1 billion. It is divided into two tranches:
| | |
| • | Tranche A ( 2/3 of facility amount) with an initial maturity on February 19, 2007 (with a 364 days extension option) and |
| | |
| • | Tranche B ( 1/3 of facility amount) with a maturity on February 20, 2009. |
The following are the original commitments undertaken by each of the Mandated Lead Arrangers in each of the tranches:
| | | | | | | | | |
| Bank | | | Tranche A
Commitments | | | Tranche B
Commitments | | | Total
Commitments |
| HSBC Bank plc | | | €5,933,333,333 | | | €2,966,666,667 | | | €8,900,000,000 |
| Citigroup Global Markets Limited | | | €4,666,666,667 | | | €2,333,333,333 | | | €7,000,000,000 |
| J.P. Morgan plc | | | €4,666,666,667 | | | €2,333,333,333 | | | €7,000,000,000 |
| BNP Paribas | | | €3,400,000,000 | | | €1,700,000,000 | | | €5,100,000,000 |
| The Royal Bank of Scotland plc | | | €3,400,000,000 | | | €1,700,000,000 | | | €5,100,000,000 |
| Deutsche Bank AG | | | €2,666,666,667 | | | €1,333,333,333 | | | €4,000,000,000 |
| Total | | | €24,733,333,334 | | | €12,366,666,666 | | | €37,100,000,000 |
|
Interest.
The rate of interest under the Facility Agreement is linked to a ratings based margin ratchet. Based on an expected initial A rating from Standard & Poor’s and an initial A2 rating from Moody’s the margin will be EURIBOR plus 22.5 basis points per annum for Tranche A and EURIBOR plus 27.5 basis points per annum on Tranche B. E.ON currently has an AA− rating from Standard & Poor’s and an Aa3 rating from Moody’s.
Moody’s has placed its Aa3/P-1 credit rating of E.ON on review for a possible downgrade. On February 22, 2006, Moody’s has indicated that ‘‘if the acquisition were to be successful, the most likely outcome would be an E.ON AG rating that is a weakly positioned at A2’’.
Standard & Poor’s has placed its AA−/A-1+ credit rating of E.ON on credit watch with negative implications. On February 21, 2006, Standard & Poor’s has stated that ‘‘based on current information and statements by the company, the ratings are unlikely to be lowered by more than two notches’’.
Utilization of the Funds.
Under the Facility Agreement, the advances of the facility may be used exclusively for the settlement of the Offers and costs relating thereto as well as for the repayment of indebtedness of Endesa and for onlending funds to Endesa for such purposes.
Mandatory Prepayment.
The Facility Agreement includes a mandatory prepayment clause which requires E.ON to prepay and cancel the facility:
| | |
| • | upon a change of control if so requested by the majority of banks within 30 days of the occurrence of a change of control event; |
| | |
| • | out of the net proceeds of amounts raised pursuant to the refinancing strategy that E.ON intends to carry out through the use of various capital markets funding sources. Subject to market conditions, E.ON intends to access the capital markets quickly, but in an orderly manner and will consider debt instruments in euros, sterling, U.S. dollars and possibly other currencies. This may also include equity or equity-like instruments if necessary. E.ON has committed that amounts raised through those refinancing activities will be applied to reduce the size of the facility but is not obliged to use other proceeds from ordinary business for such repayment; |
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| | |
| • | out of the net proceeds of any disposal required by any applicable law, regulation or any decision taken by a competent antitrust or other authority in connection with the acquisition of Endesa and received by E.ON (or capable of being made available to E.ON by way of inter-company loan or dividend); and |
| | |
| • | out of the net proceeds of material disposals that are received by E.ON (or capable of being made available to E.ON by way of inter-company loan or dividend) in excess of €1 billion (either on its own or aggregated) as long as the total term loan commitments exceed € 17 billion at the time of disposal. |
Other Commitments.
The Facility Agreement sets out, among others, general restrictions that will apply to E.ON and, after the settlement of the Offer, to Endesa and to its subsidiaries on the creation of new, or the maintenance of any existing, encumbrances, except those arising in the ordinary course of business and other exceptions to this general rule as set out in the Facility Agreement.
Furthermore, E.ON undertakes not to and to procure that no other member of the E.ON group shall dispose of the whole or any part of its assets which are, in each case, substantial in the context of the Group taken as a whole, other than:
| | |
| • | disposals in the ordinary course of business; |
| | |
| • | disposals of assets in exchange for other assets similar or superior in value and type; |
| | |
| • | disposals of obsolete or waste assets; |
| | |
| • | disposals by way of distributions of dividends (including without limitation dividends in kind; |
| | |
| • | disposals that are required by law or by decision of antitrust authorities or any other public authorities in relation to the acquisitions performed by the E.ON group; |
| | |
| • | disposals on arm’s length terms; |
| | |
| • | disposals within the E.ON group; |
| | |
| • | disposals made pursuant to and/or in connection with contractual trust arrangements created in respect of pension obligations of E.ON or any member of the E.ON group; or |
| | |
| • | disposals made with the prior written consent of the majority of the banks. |
Furthermore, the Facility Agreement establishes general undertakings, including compliance with law and regulations, pari passu ranking, insurance and change of business restrictions which are in line with the Loan Market Association standard documentation.
The Facility Agreement does not contain any restriction on the dividend or investment policy of E.ON. Furthermore there is no restriction on the level of dividends paid or investments made by Endesa.
The Facility Agreement does not require E.ON to comply with any financial covenants, i.e., it does not require the fulfillment of any financial ratios.
Lastly, and as regards to any possible veto rights of the Mandated Lead Arrangers over the terms and conditions of the Offers, subject to compliance with the Spanish Decree on Tender Offers, E.ON 12 can modify the terms and conditions of the Offers without the Mandated Lead Arrangers’ prior written consent, with the exception of the condition regarding the modification of article 32 of Endesa’s articles of association (‘‘Limits of voting rights’’). In order to waive this specific condition, E.ON, as borrower and guarantor, must receive the prior written consent of the Mandated Lead Arrangers. The conditions to the U.S. Offer are described further in Section 5 (‘‘Conditions to the U.S. Offer’’) of this Offer to Purchase.
Events of Default.
The Facility Agreement includes some events of default usually included in this kind of financing, including failure to pay, non-fulfillment of financial obligations, breach of representations and warranties and insolvency.
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Guarantees.
The Facility Agreement does not require E.ON to provide any security in the form of pledges. Endesa is not a party to the Facility Agreement. E.ON does not foresee that it will pledge the ordinary shares of Endesa which it may purchase as a result of the Offers. The Facility agreement does not require Endesa or the companies of its group to provide any security in the form of pledges or any other kind of guarantees as a result of the Offers.
The financing entities have no recourse against E.ON shareholders, against Endesa or against the shareholders of Endesa, different from E.ON 12, in order to claim compliance of the obligations assumed by E.ON under the Facility Agreement.
Pursuant to the Facility Agreement, the financing entities are not entitled to appoint directors in Endesa or to any other special right related to Endesa or the companies of its group.
Syndication.
The Mandated Lead Arrangers reserved in the Facility Agreement the right to syndicate their commitments under the Facility Agreement. A limited syndication to a group of sub-underwriters was successfully completed on October 20, 2006, resulting in a bank syndicate comprising 24 international banks. A further general syndication was completed on November 24, 2006. The syndication did not involve any material modification of the characteristics of the Facility Agreement as described in this section.
Effects of the Financing on Endesa.
The financing of the Offers made available under the Facility Agreement and its eventual refinancing in the short and medium term will not lead to any indebtedness on the part of Endesa or its group companies.
Neither Endesa nor its subsidiaries will provide any kind of guarantee for the financing of the U.S. Offer, nor will they disburse any amount to repay the Facility Agreement.
The terms and conditions of the Facility Agreement do not require E.ON to commit to an extraordinary distribution of dividend in Endesa in relation to the Facility Agreement or to the repayment of the Facility Agreement. E.ON is not required to commit to the granting of loans from Endesa to E.ON.
Repayment Plans.
Initially the whole settlement amount will be funded with drawings under the Facility Agreement, but E.ON intends to repay the drawings as soon as possible (what could imply early repayment), and has four main sources of funds to do this, namely existing and future cash, equity or equity like issues, debt capital market issues and asset disposals. The timing and size of these funding sources will depend on prevailing market conditions and no decision in this regard has been made by E.ON at the date of this Offer to Purchase, apart from what is indicated below.
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| • | Existing and Future Cash. Initially the entire settlement amount for the Offers will be funded with bank debt, but part of this will be refinanced with existing cash resources. At the date of this Offer to Purchase, it is expected that between €4 and €6 billion of liquid funds will be available for the refinancing of part of the bank debt. Also, E.ON´s business is highly cash generative, and it is foreseen that strong cash flows will be available that are sufficient to comply with the investment plans and also repayment plans. |
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| • | Equity or Equity like Issues. Depending on the volume of acceptances of the Offers, E.ON may issue equity or equity like instruments to repay part of the bank debt and help to meet E.ON’s rating objective. E.ON will consider issuing up to 10% of its equity capital. |
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| • | Debt Capital Market Issues. Subject to market conditions, E.ON intends to access the debt capital markets quickly, but in an orderly manner and will consider debt instruments in euros, sterling, U.S. dollars and possibly other currencies. E.ON has an existing €10 billion commercial paper program, and a €20 billion MTN program. Both programs have been already partially used but can be increased in size if required. |
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| • | Asset Disposals. If necessary, E.ON may also consider asset disposals to repay part of the bank debt and help to meet its rating objective. The proceeds of such sales would be used to repay the bank debt in-line with the mandatory prepayment clause. |
17. U.S. Federal and Spanish Income Tax Consequences of the U.S. Offer.
Material U.S. Federal Income Tax Consequences.
The following summary describes the material U.S. federal income tax consequences that may be relevant to U.S. Holders (as defined below) of ordinary shares and ADSs that are considering the U.S. Offer. The discussion set forth below is for general information only, does not purport to be tax advice from E.ON 12, and may not be applicable depending upon a U.S. Holder’s particular situation. U.S. Holders should consult their tax advisors with respect to the current and possibly future federal, state, local and foreign tax consequences to them of accepting the U.S. Offer.
For U.S. federal income tax purposes, a ‘‘U.S. Holder’’ means a beneficial owner of ordinary shares and ADSs, who is, for U.S. federal income tax purposes: (i) a citizen of the United States; (ii) a corporation (or an entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any political subdivision thereof; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust if (a) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions for the trust or (b) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
U.S. Holders of ADSs will be treated for U.S. federal income tax purposes as owners of the ordinary shares underlying the ADSs. Accordingly, except as noted, the U.S. federal income tax consequences apply equally to holders of the ADSs and ordinary shares.
This summary provides general information only and is directed solely at U.S. Holders who hold their Endesa securities as capital assets and whose functional currency is the U.S. dollar. This summary does not discuss all the tax consequences that may be relevant to U.S. Holders in light of their particular investment circumstances, such as investors subject to special tax rules, including: partnerships, financial institutions, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies and tax-exempt investors, U.S. Holders who received their ordinary shares in return for services rendered or in connection with their employment, persons that own (directly or indirectly) 10% or more of Endesa voting stock or persons that hold their ordinary shares as part of a hedge, straddle or other integrated transaction. This summary does not include descriptions of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to U.S. Holders. Moreover, this summary does not discuss special tax provisions which may apply to individuals who relinquished their U.S. citizenship or residence.
This summary is based on the Internal Revenue Code of 1986, the U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date hereof, and all of which are subject to change, possibly with retroactive effect, or different interpretations. No ruling has been requested from the Internal Revenue Service in connection with the U.S. Offer and no assurance can be given that the treatment described herein will be accepted by the Internal Revenue Service or, if challenged, by a U.S. court.
U.S. Holders who sell their securities pursuant to the U.S. Offer will generally recognize taxable gain or loss equal to the difference between their amount realized and their tax basis in their securities. Such gain or loss generally will be U.S.-source capital gain or loss and will be long-term if such U.S. Holders held their securities for more than one year. In the case of a tendering non-corporate U.S. Holder, any long-term capital gain will generally be subject to U.S. federal income tax at a maximum rate of 15%. For both corporate and non-corporate taxpayers, the deductibility of capital losses is subject to limitations.
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Non-corporate U.S. Holders may be subject to U.S. federal backup withholding tax (imposed at a rate of 28%) and information reporting on payments received under the U.S. Offer if they fail to furnish and certify their correct taxpayer identification number in the manner required or otherwise fail to establish a basis for exemption. To prevent backup withholding, U.S. Holders should complete Internal Revenue Service Form W-9 or a valid substitute form.
If a U.S. Holder does not provide a correct taxpayer identification number, such U.S. Holder may be subject to penalties imposed by the Internal Revenue Service. Amounts withheld from payments to U.S. Holders generally will be allowed as a credit against their U.S. federal income tax liability, provided that the required information is furnished to the Internal Revenue Service in a timely manner. U.S. Holders should consult their tax advisors as to their qualifications for exemption from withholding and the procedure for obtaining such exemption.
IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, E.ON and E.ON 12 informs you that any U.S. federal tax advice contained in this document (including any attachment) is not intended or written by us to be used, and cannot be used, (i) by any taxpayer for the purpose of avoiding tax penalties under the Internal Revenue Code or (ii) for promoting, marketing or recommending to another party any transaction or matter addressed herein.
Material Spanish Resident and Non-resident Income Tax Consequences.
The following summary describes the material Spanish resident and non-resident income tax consequences that may be relevant to holders of ordinary shares and ADSs that are considering the U.S. Offer. The discussion set forth below is for general information only, does not purport to be tax advice from E.ON 12, and may not be applicable depending upon the particular situation of a holder of Endesa securities. Holders of Endesa securities should consult their tax advisors with respect to the current and possibly future tax consequences to them of accepting the U.S. Offer.
The discussion set forth below applies only to owners of ordinary shares and ADSs who hold those securities as an investment and who are their absolute beneficial owners and who are subject to the Spanish general tax regime for residents and non-resident taxpayers.
Under Spanish law, any capital gains derived from securities issued by a Spanish entity that are realized by persons residing outside Spain for Spanish tax purposes are considered to be Spanish source income and, therefore, are taxable in Spain at a 18% tax rate.
However, capital gains realized by U.S. Holders upon the exchange of ordinary shares or ADSs pursuant to the U.S. Offer will not be taxed in Spain if U.S. Holders provide certain documentation. U.S. Holders will be required to establish that they are entitled to the exemption from tax by providing to the relevant Spanish tax authorities Spanish Form 210 and a certificate of residence stating that such U.S. Holder is a resident of the United States for the purposes of the U.S.-Spain tax treaty. Spanish law requires that both of these forms be filed within one month from the date on which the capital gain is realized. U.S. Holders of ADSs should consult their own tax advisors regarding the obligation to file these forms.
The sale of ordinary shares and ADSs is exempt from the Spanish Value Added Tax and normally exempt from the Spanish Transfer Tax.
Spanish resident individuals will realize a capital gain or loss in an amount equal to the difference between the Spanish tax basis in their ordinary shares or ADSs and the offer consideration valued in euros. Those gains realized by Spanish resident individuals are taxable in Spain at a 18% fixed tax rate regardless of the period during which such individuals held the Endesa securities. The ordinary shares and ADSs which were acquired first will be deemed to be those sold first (FIFO method).
For each year during which the ordinary shares and ADSs were held before December 31, 1994, the capital gains resulting from their disposition will be reduced by 25%. However, the calculation of this reduction will only be applied to the part of the capital gain deemed to have taken place until January 20, 2006.
Capital losses resulting from the disposition of ordinary shares and ADSs, when similar securities were acquired within the two months preceding (or following) their disposition, will not be considered for tax purposes.
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Spanish resident companies, as well as Spanish permanent establishments of foreign taxpayers, will realize positive or negative income for the same amount described in the preceding paragraph. Positive income will be subject to a 32.5% income tax rate in 2007 and 30% thereafter. Holders of more than 5% of Endesa would be entitled to a tax credit equal to 32.5% in 2007 and to 30% thereafter of the reserves of Endesa which correspond to their participation and which have been accumulated during their holding period, to the extent such reserves had effectively been taxed at the Endesa level. Likewise, holders of more than 5% of Endesa may benefit from the 14.5% in 2007 and 12% thereafter reinvestment tax credit, subject to certain requirements.
Non-residents in Spain will realize a capital gain or loss for the same amount described in the preceding paragraphs. Capital gains will be subject to the Spanish 18% non-resident income tax. Non-resident individuals benefit from the capital gain reduction scheme described above for ordinary shares and ADSs acquired before December 31, 1994.
Holders of ordinary shares and ADSs which are resident in countries with which Spain has signed a tax treaty would normally not be taxed in Spain pursuant to the provisions of such tax treaties.
In addition to the treaty protection described in the preceding paragraph, the Spanish tax law sets forth a domestic exemption for gains realized upon the disposal of certain securities which are listed in the Spanish markets, such as the ordinary shares, for residents in countries with which Spain has signed a tax treaty containing an ‘‘exchange of information’’ clause.
Finally, the Spanish tax law also sets forth an exemption for holders of ordinary shares and ADSs who are resident in the European Union (tax havens excluded) for the capital gains realized upon the disposal of Spanish shares to the extent (i) they have not directly or indirectly held more than 25% of the share capital of Endesa at any time during the preceding 12-month period; and (ii) the assets of the company are not mainly real estate located in Spain whether directly or indirectly.
18. Legal Matters; Required Antitrust and Other Regulatory Approvals.
Spanish Government Golden Share Abolished.
Prior to recent legal developments, a number of previously state-owned Spanish companies had ‘‘golden shares’’ or provisions in their by-laws which permitted the Spanish government to take certain actions to limit the acquisition of shares above specified thresholds. On November 25, 2005, the Spanish Council of Ministers proposed draft regulations to remove golden shares from such previously state-owned Spanish companies, including Endesa. On May 26, 2006, the Spanish government passed Spanish Law 13/2006, which removed the ‘‘golden share’’ from such previously state-owned Spanish companies, including Endesa.
Antitrust and Regulatory Approvals.
In connection with the Offers, the approval of various domestic and foreign regulatory authorities having jurisdiction over E.ON or Endesa, and their respective subsidiaries and their respective businesses, is required. The principal approvals required are described below.
Antitrust Approvals.
European Union.
E.ON and Endesa each conduct business in the member states of the European Union. Council Regulation (EEC) No. 139/2004 requires that certain mergers or acquisitions involving parties with aggregate worldwide sales and individual European Union sales exceeding specified thresholds be notified to and approved by the European Commission before such mergers and acquisitions are consummated. This Regulation also gives the member states of the European Union the right to request that the European Commission refer jurisdiction to review a merger to their national competition authorities under the provisions of the relevant national merger law where it may have an effect on competition in a distinct national market. Such a request must be notified to the European Commission within 15 working days of the transaction’s notification to the European Commission. There was no such referral in connection with the Offers.
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E.ON, as sole shareholder of E.ON 12, submitted its proposed acquisition of Endesa to the European Commission on March 16, 2006. The European Commission reviewed the acquisition of Endesa pursuant to the Offers to determine whether the acquisition is compatible with the common market. The European Commission concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area or any substantial part of it and therefore, on April 25, 2006, decided not to oppose the acquisition.
On July 25, 2006, Iberdrola, S.A. filed an appeal with the EC Court of First Instance against the decision of the European Commission as of April 25, 2006. The appeal does not automatically suspend the execution of the European Commission’s decision. If the appeal were totally or partially upheld and the EC Court of Justice subsequently would confirm such decision of the Court of First Instance, pursuant to Article 10(5) of Council Regulation (EEC) No. 139/2004, the acquisition of Endesa by E.ON 12 would be re-examined by the European Commission in the light current market conditions. If the re-examination of the transaction led the European Commission to declare it incompatible with the common market or to declare it compatible with the common market subject to conditions, E.ON 12 understands that the European Commission may require it to dispose of all the ordinary shares or assets acquired, in order to restore the situation prevailing prior to the implementation of the concentration. However, such a disposition would not affect the purchase of Endesa securities pursuant to the Offers.
Spain.
According to Council Regulation (EEC) No. 139/2004 and article 14.1 of Spanish Law 16/1989, of July 17, on the Defense of Competition, the acquisition by E.ON 12 of Endesa has been notified to the European Commission and not to the Service for the Defense of Competition, the Spanish competition authority, since it represents a combination involving parties with aggregate worldwide sales and individual European Union sales exceeding specified thresholds.
Other jurisdictions.
E.ON 12 is not required to file any notification with the competition authorities of the European Union member states with respect to the acquisition of Endesa by E.ON 12.
Based on its review of publicly available information regarding the businesses in which Endesa and its respective subsidiaries are engaged, the acquisition of E.ON 12 of Endesa is subject to the following notification requirements and/or approvals in non-European Union countries:
Argentina
The antitrust authorization period is 45 days from the date notice is complete, unless it is suspended by the Commission for the Defense of Competition in order to request additional information from E.ON 12. Therefore, in practice, it may take several months to obtain the authorization from the Argentine antitrust authority. If the authorization period is not suspended and the 45-day period expires without the Commission for the Defense of Competition having taken any decision, the Offers shall be deemed to have been tacitly approved by the Commission for the Defense of Competition.
E.ON 12 notified the Argentinean competition authorities on May 22, 2006. After submitting its notice, the Commission for the Defense of Competition requested that E.ON 12 provide additional information in order to complete such notification, which suspended the 45-day deadline for the authorization of the transaction. On November 22, 2006, the Commission for the Defense of Competition resumed its assessment of the transaction upon approval of E.ON 12’s bid by the CNMV on November 16, 2006 and requested the opinion of the Argentinian gas regulator (ENARGAS) and of the Argentinian electricity regulator (ENRE) regarding the transaction. ENARGAS issued its opinion on November 15, 2006, expressing no concerns about the transaction, but the ENRE has not yet started its review of the transaction. As a result, the proceeding before Commission for the Defense of Competition remains suspended.
The Offers do not need to be suspended pending the authorization. Nevertheless, should the authorization be denied after the completion of the Offers, E.ON 12 would be required to sell the
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assets and companies of Endesa in Argentina. E.ON 12 believes that no circumstances exist that would prevent the acquisition of Endesa from being authorized by the Argentinean competition authorities.
Brazil
On March 15, 2006, E.ON 12 filed a request for authorization with the Brazilian competition authorities. The antitrust authorization period is generally between two and three months, unless it is suspended by the Brazilian competition authorities in order to request additional information from E.ON 12. On March 27, 2006, the investigation department of the Brazilian Electric Energy Agency issued an opinion recommending the approval of the Offers. Furthermore, the investigation department of the Brazilian Ministry of Justice has requested the Brazilian Electric Energy Agency (which is referred to as the ‘‘ANEEL’’) to issue an opinion regarding the Offers. The Offers are currently under review by the ANEEL.
The Offers need not be suspended pending the authorization. Should the authorization be denied following the completion of the Offers, E.ON 12 would be required to sell the assets and companies of Endesa in Brazil. E.ON 12 believes that no circumstances exist that would prevent the acquisition of Endesa from being authorized by the Brazilian competition authorities.
Peru
Neither E.ON nor Endesa conduct business in Peru. Therefore, the acquisition of Endesa by E.ON 12 is not subject to any notification to the Peruvian competition authorities. E.ON 12 has received oral confirmation by the Peruvian competition authorities that it is not required to file a notification of the combination. Although not mandatory, E.ON 12 notified the Peruvian competition authorities on June 23, 2006, for information purposes only.
Based on its review of publicly available information regarding the businesses in which Endesa and its respective subsidiaries are engaged, E.ON 12 is not aware of any other authorization that would be necessary for E.ON 12 to obtain from other competition authorities in addition to the notifications and authorizations described above.
As of the date of this Offer to Purchase, E.ON 12 is not able to accurately assess the financial and business impact that the failure to obtain any or all of the previous authorizations would have on the combined businesses of E.ON and Endesa. Notwithstanding this, it is not foreseeable that any such impact would be significant. In the event that the operation could be prohibited in some of the above countries, E.ON will sell the correspondent assets by means of a tender or by any other adequate procedure.
Other Regulatory Approvals.
Spanish General Secretary of Energy.
On March 8, 2006, E.ON 12 filed a notification of the Spanish Offer to the General Secretary of Energy (Secretaría General de Energía) of the Ministry of Industry, Tourism and Trade, in accordance with Article 3 and Transitory Provision Third of Law 5/1995, of March 23, on the applicable regime for the sale of government shareholdings in certain companies and golden shares (Ley 5/1995, de 23 de marzo, de regimen jurídico de enajenación de participaciones públicas en determinadas empresas).
On April 6, 2006, the General Secretary of Energy resolved, in light of the notification filed by E.ON 12, not to initiate the proceedings contemplated under article 4 of Spanish Law 5/1995.
The regime governing golden shares in Spanish Law 5/1995 was revoked by Spanish Law 13/2005, of May 26.
General Directorate for Energy of the Regional Government of the Balearic Islands.
E.ON 12 filed an application to the General Directorate for Energy (Dirección General de Energía) of the Regional Government of the Balearic Islands on May 18, 2006, for the purposes of Decree 6/2006, of January 27, on the regulation of the procedure for the authorization of the transfer
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of electricity distribution facilities (Decreto 6/2006, de 27 de enero, sobre la regulación del procedimiento de autorización de la transmisión de instalaciones de distribución de energía). On November 15, 2006, the General Directorate for Energy granted the requested authorization.
National Commission for Energy.
On March 23, 2006, E.ON 12 filed with the CNE an application requesting authorization to proceed with the Spanish Offer under the Royal Decree-Law 4/2006, of February 24, which amended the functions of the CNE.
On July 27, 2006, the CNE issued a resolution authorizing the Offers, subject to the fulfillment of 19 conditions.
On August 10, 2006, E.ON 12 filed an administrative appeal against the resolution of the CNE with the Ministry of Industry, Tourism and Trade (which is referred to as the ‘‘Ministry of Industry’’), in which E.ON 12 argued that the conditions are excessive and unlawful.
On September 26, 2006, the European Commission declared that the conditions imposed on E.ON 12 by the CNE are incompatible with European Union law, and demanded their removal. On October 18, 2006, the European Commission initiated an infringement procedure against Spain for breach of European Union law by not complying with the order to remove the conditions.
On November 3, 2006, the Ministry of Industry confirmed the authorization of the Spanish Offer that had been granted by the CNE, removed some of the conditions and modified other conditions. The remaining conditions are outlined below:
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| • | E.ON 12 must keep Endesa as the parent company of its group and may not merge any of its subsidiaries with E.ON 12 for a period of five years after having obtained control of Endesa. Endesa must keep its brand, registered office and administrative body. |
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| • | E.ON 12 must adequately fund Endesa in order to maintain a ratio of net financial debt to EBITDA of less than 5.25 for a period of three years after having obtained control of Endesa. |
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| • | Until the year 2010, member companies of the combined E.ON and Endesa group carrying out regulated activities in Spain may only pay dividends if the resources generated by them are sufficient to meet their financial and investment commitments. |
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| • | E.ON 12 must make all investments in regulated activities of gas and electricity as set out in the Endesa investment plans for the period 2006-2009 and certain other plans, and must furnish certain information and plans to the competent authorities. |
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| • | In the period from 2010 to 2015, E.ON 12 must annually inform the CNE about its future investment plans regarding regulated activities and strategic assets of gas and electricity. |
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| • | E.ON 12 must maintain Endesa’s ordinary generation facilities for their remaining usable life as currently intended by Endesa. |
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| • | Until the year 2009, E.ON 12 may not redirect any natural gas to markets other than the Spanish market, if the annual volume of gas as set out in the natural gas supply plans submitted by Endesa to the CNE is not met. |
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| • | All nuclear facilities owned by Endesa must comply with the obligations and regulations regarding nuclear matters and all applicable law and agreements as to the management of such nuclear facilities regarding questions of security and supply of uranium. |
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| • | For a period of five years after obtaining control of Endesa, E.ON 12 must maintain the current companies owning assets used for the generation, distribution or transmission of insular or extra-peninsular electricity systems. |
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| • | For a period of five years after obtaining control of Endesa, E.ON 12 must guarantee that the aggregated annual consumption of each of Endesa’s plants that currently consume Spanish coal is not less than the aggregated annual volume set out in the National Plan of Coal Mining 2006-2012. |
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| • | Future acquisitions of shares in Endesa shall be governed by the same set of rules as in force. |
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| • | E.ON 12 must not adopt strategic decisions as to Endesa which will affect the security of supply contrary to the Spanish law. |
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| • | Any violation of the conditions set out by the decision of the Ministry of Industry may lead to legal proceedings under the applicable Spanish energy regulations. |
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| • | If, during a period of ten years after E.ON 12 obtained control of Endesa, any third party acquires or attempts to acquire, directly or indirectly, shares in E.ON amounting to more than 50% of the share capital or granting more than 50% of the voting rights, E.ON must notify CNE, which will be entitled to modify the decision of the Ministry of Industry set forth above. In this case, CNE may require E.ON to dispose of all the ordinary shares of Endesa. |
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| • | The CNE may request the Spanish government to adopt measures based on the relevant Spanish regulations in order to guarantee the supply of energy in emergency situations. |
E.ON 12 considers the conditions set forth in the decision of the Ministry of Industry acceptable and does not intend to challenge its decision in court.
However, on December 20, 2006, the European Commission ruled that the conditions set forth in the decision of the Ministry of Industry as of November 3, 2006 were incompatible with EU law and requested the Spanish government to withdraw the modified conditions by January 19, 2007. According to press reports, the Spanish government has announced that it will not withdraw the modified conditions. The Commission may now open infringement proceedings against Spain under Article 226 of the EC Treaty.
Finally, on January 25, 2007, the European Commission brought an action against Spain before the European Court of Justice regarding the approval of Royal Decree-Law 4/2006, of February 24, which amended the functions of the CNE.
Other jurisdictions.
Brazil
On July 3, 2006, E.ON 12 filed a request for authorization with the Brazilian energy regulatory agency (ANEEL) to acquire a controlling interest in Endesa’s subsidiaries that hold public service concessions. In response to such request, the Secretary of Economic and Financial Control of ANEEL ruled by official letter dated August 14, 2006, that Endesa was required to request authorization, not E.ON 12. E.ON 12 asked that Endesa undertake all necessary measures to enable the acquisition by E.ON 12 of Endesa’s public service concessionaire subsidiaries in Brazil. On January 25, 2007, Endesa filed the new request for authorization with ANEEL.
Although Brazilian law does not provide for a time limit for ANEEL to issue its authorization, this authorization may take approximately 45 business days to obtain.
If E.ON 12 does not obtain such authorization prior to the settlement of the Offers, E.ON 12 would be prevented from exercising control and, therefore, participating in the management of Endesa’s subsidiaries. Furthermore, if the authorization is denied, E.ON 12 may be required to sell Endesa’s public service concessionaire subsidiaries as well as the other subsidiaries operating under government authorization in Brazil. E.ON 12 would dispose of these assets by means of an auction or other efficient procedure. Finally, ANEEL may also decide to subject the grant of its authorization to certain conditions or restrictions. E.ON 12 is not able to estimate the impact of such restrictions.
Argentina
Authorization for the acquisition of indirect control over the subsidiaries of Endesa in Argentina is not required. However, each of the relevant subsidiaries of Endesa must communicate such event to the energy regulator in Argentina following the settlement of Offers. This reporting obligation is made for the purpose of updating the corresponding registers in the Argentine energy sector. The deadline for notification is 10 days following the settlement of the Spanish Offer.
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Colombia
Acquisition of indirect control of the subsidiaries of Endesa in Colombia must be communicated to the Colombian energy regulator. Such communication is an informational obligation following the settlement of the Spanish Offer, for which no specific deadline is stipulated under Colombian law. The Colombian energy regulator could impose conditions relating to the terms of the government authorizations under which the Colombian subsidiaries of Endesa operate. However, E.ON 12 believes that, in principle, there are no circumstances which might give rise to the imposition of conditions as a result of the acquisition of indirect control over the subsidiaries of Endesa in Colombia.
Turkey
Endesa has a 50% shareholding in a Turkish company, and accordingly, E.ON 12 has requested the compulsory authorization from the Turkish regulatory authorities in the energy sector prior to the acquisition of such shareholding.
E.ON 12 requested the corresponding authorization from the Turkish regulatory authorities in the energy sector on September 5, 2006. On September 13, 2006, the Turkish regulatory authorities stated that no decision can be made because the Offers are subject to conditions.
In the event that, after E.ON has obtained control of Endesa and authorization were denied, E.ON 12 would have to sell Endesa’s holding in the Turkish company. However, E.ON 12 believes that the authorization will be obtained.
Poland
The acquisition of indirect control of the subsidiaries of Endesa in Poland is not subject to any authorization. However, E.ON 12 is required to provide notification of the transaction to the Polish energy regulator following the settlement of the Offers, although no specific deadline for doing so is specified under Polish law. This notification has the purpose of updating the registers in the Poland energy sector, and under no circumstances could it have an impact on the Offers or require E.ON 12 to proceed with the sale of Endesa’s subsidiaries in Poland or of the assets of such subsidiaries.
Based on its review of publicly available information regarding the businesses in which Endesa and its respective subsidiaries are engaged, E.ON 12 is not aware of any other license or regulatory permits from the other regulatory authority within the energy sector that would be necessary for E.ON 12 to obtain in addition to the notification or authorization above described.
As of the date of this Offer to Purchase, E.ON 12 is not able to accurately assess the financial and business impact that the failure to obtain any or all of the previous authorizations would have on the combined businesses of E.ON and Endesa. However, E.ON 12 does not estimate that there would be any significant impact. In any jurisdiction in which the transaction were not authorized, E.ON 12 would expect to dispose of the relevant assets by means of an auction or any other efficient procedure.
Other legal actions.
Acciona litigation.
On October 12, 2006, E.ON and E.ON 12 filed a complaint against Acciona and Finanzas Dos, S.A. (which is referred to as ‘‘Finanzas’’), a wholly owned subsidiary of Acciona, in the U.S. District Court for the Southern District of New York (which is referred to as the ‘‘Court’’) alleging that a Schedule 13D filed by Acciona and Finanzas with the SEC on October 5, 2006, with respect to the acquisition of Endesa shares, was materially false and misleading. The complaint sought certain injunctive relief, including relief in the form of a declaration that the Schedule 13D violates Section 13(d) of the Exchange Act, an order requiring that Acciona and Finanzas correct by public means their material misstatements and omissions and be enjoined from purchasing or making any arrangement to purchase any ordinary shares until such time as they have filed an accurate Schedule 13D.
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On October 13, 2006, E.ON and E.ON 12 filed a motion for a preliminary injunction as well as a motion for expedited scheduling and discovery, and the parties participated in an initial hearing with the Court to discuss the litigation. The Court scheduled a second hearing for October 20, 2006 to consider plaintiffs’ motions and to schedule further proceedings in connection with plaintiffs’ application for a preliminary injunction. On October 19, 2006, Acciona and Finanzas amended their Schedule 13D and made public certain information previously omitted from their Schedule 13D, including the existence of fourteen total return swap agreements with Banco Santander Central Hispano, S.A., (which is referred to as ‘‘Banco Santander’’) related to Endesa Shares. Acciona and Finanzas also moved to dismiss the complaint asserting, among other things, that the amended Schedule 13D mooted E.ON’s action. At the October 20, 2006 hearing, the Court requested that E.ON file an amended complaint addressing the amended Schedule 13D.
On November 3, 2006, E.ON filed an amended complaint (in which a wholly owned subsidiary of E.ON AG, BKB AG, was added as a plaintiff), a brief in opposition to Acciona’s and Finanzas’ motion to dismiss, and a renewed application for preliminary injunctive relief. The amended complaint alleges that the initial Schedule 13D filed by Acciona and Finanzas, as well as the Schedule 13D as amended on October 19, 2006, and October 25, 2006, are materially false and misleading and seeks certain injunctive relief, including relief in the form of a declaration that the Schedule 13D, as amended, violates Section 13(d) of the Exchange Act, an order requiring that Acciona and Finanzas correct by public means their material misstatements and omissions and be enjoined from purchasing or making any arrangement to purchase any ordinary shares in connection with the settlement of the total return swaps it entered into with Banco Santander.
On November 16, 2006, the Court advised that it would deny Acciona’s motion to dismiss, and it granted E.ON’s motion for expedited scheduling and discovery. On November 20, 2006, the Court issued an Opinion and Order denying Acciona’s motion to dismiss.
On November 17, 2006, E.ON supplemented its amended complaint to add allegations that Acciona’s acquisition of 13.692% of Endesa’s shares on September 25, 2006 (the initial 10% acquired directly by Acciona on September 25, 2006, plus an additional 3.692% acquired by Banco Santander and subjected to the first total return swap with Acciona) were acquired by means of an illegal tender offer in violation of Sections 14(d) and 14(e) of the Exchange Act. E.ON seeks an order that Acciona be required to offer withdrawal rights (through an offer of rescission) to all Endesa shareholders who sold shares to Acciona or Banco Santander in response to Acciona’s illegal tender offer.
On December 11, 2006, Acciona filed a motion to dismiss E.ON’s illegal tender offer claim. On January 9, 2007, the Court issued an Opinion and Order denying that motion to dismiss. Briefing on E.ON’s motion for a preliminary injunction is scheduled to be completed by February 2, 2007.
CNMV proceedings I.
On January 2, 2007, E.ON filed a complaint with the CNMV against Acciona, Gas Natural and other natural or legal persons having participated in the alleged unlawful conduct, alleging that Acciona and Gas Natural are acting in concert without launching a joint tender offer in Spain and therefore are violating Spanish law. In its complaint, E.ON requests that Acciona shall be enjoined from acquiring ordinary shares and prohibited from exercising the voting rights of the ordinary shares already held. On January 8, 2007, Acciona was requested by the CNMV to submit, within a period of ten Spanish business days, all information and comments deemed appropriate with respect to the content of the complaint filed by E.ON. On January 15, 2007, the CNMV published a filing in which Acciona opposed E.ON’s complaint on factual and legal grounds. The decision of the CNMV whether or not to initiate disciplinary proceedings is pending.
CNMV proceedings II.
On January 16, 2007, the CNMV received a letter from Acciona, in which Acciona claimed that, according to reports published in the press, E.ON 12 held certain information concerning Endesa that was not known to Endesa’s shareholders. Acciona further stated in its letter that E.ON 12 should be compelled to disclose this information, and any future plans of E.ON 12 based on this information, to the Endesa shareholders and, in particular, to Acciona, in accordance with the principles of equal
38
treatment and the protection of investors and so that shareholders are able to form a reasoned judgment regarding the Offers. Specifically, Acciona requested that the Spanish Prospectus authorized on November 16, 2006, by the CNMV be modified to include this information or that the CNMV take any other measure to ensure that the Endesa shareholders are furnished with this information. On January 17, 2007, the CNMV requested that E.ON 12 submit, within ten Spanish business days, all information and comments deemed appropriate with respect to the Acciona’s request. On January 25, 2007, E.ON 12 filed with the CNMV a response to Acciona’s complaint. The decision of the CNMV regarding whether or not to initiate disciplinary proceedings is pending.
Barcelona litigation I.
On July 28, 2006, Gas Natural filed a pre-trial proceeding request with the Court for Business Matters No. 1 in Barcelona (Juzgado de lo Mercantil nº 1 de Barcelona) based on the Spanish Unfair Competition Law requesting Endesa, E.ON, HSBC Bank plc, Citigroup, BNP Paribas, J.P. Morgan plc, Deutsche Bank AG and Deutsche Bank S.A.E. (which are referred to as the ‘‘Requested Parties’’) to furnish certain information and documents on the contacts maintained amongst them in connection with the Spanish Offer, alleging possible unfair competition practices and the use of inside information. On October 25, 2006, the Court for Business Matters No. 1 in Barcelona ordered the Requested Parties to provide copies of certain documents relating to the Spanish Offer within 15 days from the notification of such decision. The requested documents, relating to the Spanish Offer, include, but are not limited to, the confidentiality agreements entered into by the Requested Parties, Board minutes, minutes of meetings, the agreements and mandate letters among Endesa, E.ON and their respective advisors, due diligence reports, and copies of all mailings amongst the Requested Parties. After the requested documents are furnished, the Court for Business Matters No. 1 in Barcelona will decide which of such documents shall be provided to Gas Natural. This decision will depend on the eventual relevance of such documents to serve as a basis for a possible future lawsuit.
The request for pre-trial proceedings does not imply the initiation of further jurisdictional proceedings against the Requested Parties. It is a pre-trial activity only, which purpose is to furnish the requesting party with the sufficient information to decide whether or not to file a lawsuit. No request for precautionary measures has been filed. As of the date of this Offer to Purchase and to the knowledge of E.ON and E.ON 12, only Endesa, Deutsche Bank AG and Deutsche Bank S.A.E. have appeared in the pre-trial proceedings and the other Requested Parties, including E.ON, have not yet been notified.
Because this is pre-trial activity only and, as mentioned above, Gas Natural has not filed a request for precautionary measures, the Offers should not be affected by these proceedings. However, Gas Natural could file a lawsuit on the basis of information obtained in these proceedings and possibly request that the Spanish Offer be suspended.
Barcelona litigation II.
According to press reports in Spain, Gas Natural has filed a lawsuit against E.ON with the Court for Business Matters No. 5 in Barcelona alleging that E.ON is abusing a dominant position in violation of article 82 of the EC Treaty and has requested an order of the court declaring the Offers void. As of the date of this Offer to Purchase, E.ON has not been served with the respective complaint.
Gas Natural New York litigation.
On November 30, 2006, Gas Natural filed a complaint against E.ON and E.ON 12 in the U.S. District Court for the Southern District of New York alleging that on November 17, 2006, E.ON and E.ON 12 had filed with the SEC a false and misleading Schedule TO-C containing a preliminary offer document in connection with the proposed tender offer for Endesa. On December 4, 2006, Gas Natural moved for a preliminary injunction seeking, among other things, to require E.ON and E.ON 12 to make additional disclosures to correct allegedly false and misleading statements and to prevent E.ON and E.ON 12, until additional disclosures were made, from taking further steps to consummate a U.S. tender offer or purchasing ordinary shares from U.S. holders. On December 11, 2006, E.ON and E.ON 12 moved to dismiss the lawsuit. On December 19, 2006, the court dismissed most of the
39
claims. The remaining claim concerns Gas Natural’s allegation that E.ON and E.ON 12 failed to disclose material agreements with Endesa; the Court expressed no view on the merits of that claim, but held only that it had been pleaded with sufficient specificity to survive a motion to dismiss. By stipulation entered by the Court on December 27, 2006, Gas Natural withdrew without prejudice its motion for a preliminary injunction and the case was stayed until the earlier of 45 days from entry of the stipulation or E.ON or E.ON 12’s commencement of a tender offer in the U.S. for ordinary shares or ADSs. Gas Natural’s complaint and other papers filed in the course of this proceeding are publicly available for a fee from the website of the PACER Service Center (http://pacer.psc.uscourts.gov), the U.S. Federal Judiciary’s centralized system for electronic access to court records, by selecting on the PACER website the U.S. District Court for the Southern District of New York and querying the party name ‘‘E.ON’’.
Obligation to make tender offers in other jurisdictions.
If the Offers are successful, pursuant to local laws in the countries of some of Endesa’s subsidiaries, it may be necessary to make tender offers for the outstanding shares of certain subsidiaries. The only offers which might be made for the stock of publicly traded subsidiaries of Endesa are the following:
Brazil.
In accordance with Law 6404/76 on stock companies, and Brazilian Securities Commission (Commissao de Valores Mobilarios) Instruction 361/2002, upon taking effective control of Endesa, E.ON 12 might be required to launch tender offers for Ampla Energía e Serviços S.A. Ampla Investimentos e Serviços, S.A. and Companhia Energética do Ceará (COELCE), Endesa subsidiaries whose shares are listed on the Sao Paulo Stock Exchange. Pursuant to the applicable Brazilian laws, these offers must be made for the share capital of such subsidiaries not controlled by Endesa within 30 days after E.ON 12 takes effective control of Endesa. However, according to a recent interpretation of the applicable laws by the Brazilian Securities Commission, it is likely that E.ON 12 will not be requested to make any of these tender offers.
Peru.
Pursuant to sections 68° to 74° of the Unified Text of the Securities Market Law, approved by the Supreme Decree N° 093-2002-EF enacted on June 15, 2002, and the regulation enacted by the Peruvian Securities Exchange Commission (CONASEV) under the Resolution N° 009-2006-EF/94.10, in force since May 2006 and amended by Peruvian Securities Exchange Commission (CONASEV) under Resolution N° 020-2006-EF/94.10 enacted in April 2006, if the Offers are successful, E.ON 12 would be required to launch a tender offer for Edegel S.A.A., Edelnor S.A.A., Generandes Perú S.A. and Empresa Eléctrica de Piura S.A., Endesa’s subsidiaries which have at least one class of shares listed on the Lima Stock Exchange. Pursuant to the above regulations, these tender offers should be launched within four months after the settlement of the Offers and must be for the share capital of such subsidiaries not controlled by Endesa.
Chile.
On December 7, 2005, the SVS confirmed, through Oficio Ordinario nº 12.825, that E.ON 12 is not required to launch a tender offer pursuant to Chilean Securities Law 18.045 or pursuant to the Chilean Stock Companies Law 18.046 for Enersis, S.A., Endesa Chile, S.A., Chilectra, S.A. and E.E. Pehuenche, S.A., Endesa subsidiaries which are listed on the Santiago de Chile Stock Exchange.
E.ON 12 estimates that the amount that would have to be spent for mandatory tender offers for minority interests in Brazil and Peru, as described above, would be approximately €550 million.
19. Additional Information.
Recommendation of Endesa’s Board of Directors.
Endesa’s formal recommendation to Endesa shareholders in relation to the announced increased offer price of at least €34.50 will not be made and published until after the date that the CNMV approves the formal increase of the offer price
40
On February 21, 2006, based on the then announced offer price of €27.50, Endesa’s board of directors made a preliminary assessment that the consideration offered by E.ON 12 clearly improved the consideration offered by Gas Natural, but that the consideration offered by E.ON nevertheless did not adequately reflect Endesa’s real value. On November 21, 2006, Endesa’s board of directors, based on an offer price of €25.405, confirmed its preliminary assessment as of February 21, 2006 and recommended that Endesa securityholders not tender their Endesa securities in the Offers for a price of €25.405 per ordinary share and ADS, given that the offer price, at that time, had to be increased up to, at least, €35.00 per ordinary share and ADS. For a description of the offer price and its reduction see Section 3 (‘‘Consideration’’) of this Offer to Purchase.
A number of contacts between representatives of E.ON and Endesa in relation to this U.S. Offer have taken place. See Section 14 (‘‘Background of the Offers; Contacts with Endesa’’) of this Offer to Purchase for more details of the contacts between E.ON and Endesa.
HSBC Report.
Pursuant to Spanish law, E.ON 12 was required to submit to the CNMV an independent expert’s report evidencing that the offer by E.ON 12 represents an improvement over the competing offer by Gas Natural for the ordinary shares of Endesa. E.ON has received such an independent expert’s report from its financial advisor, HSBC Bank plc, and filed that report with the CNMV. HSBC’s report is dated November 10, 2006, and concludes that, as of the date of the report, and based on the assumptions and limitations set forth therein, the consideration offered by E.ON 12 pursuant to its Spanish Offer is of higher value than the consideration offered by Gas Natural pursuant to the Spanish offer of Gas Natural.
20. Certain Fees and Expenses.
Except as set forth below, E.ON 12 will not pay any fees or commissions to any broker or other person soliciting tenders of Endesa securities pursuant to the U.S. Offer or the Spanish Offer.
E.ON 12 will pay the fees charged by the depositary for the ADSs for ADSs tendered into the U.S. Offer, including any fees charged by the ADS depositary to redeposit ordinary shares underlying tendered ADSs that have been previously withdrawn from deposit with the ADS depositary in the event that the U.S. Offer is not consummated. All other fees and expenses which may be incurred as a result of the tender of Endesa securities by a holder thereof will be borne by the holder. These fees and expenses include any expenses that the U.S. Tender Agent will incur in converting the consideration into U.S. dollars (which will be deducted from the cash consideration to be paid in the U.S. Offer) and any commissions which Endesa shareholders may be required to pay to their broker or bank to tender their Endesa securities.
E.ON 12 has retained HSBC to act as its financial advisor in connection with the Offers. HSBC will receive reasonable and customary compensation for its services as financial advisor, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection therewith, including certain liabilities under the U.S. federal securities laws. HSBC has also, in the past, rendered various investment banking and financial advisory services to E.ON for which it has received customary compensation.
E.ON 12 has retained Innisfree M&A Incorporated to act as Information Agent in connection with the U.S. Offer. In its role as Information Agent, Innisfree may contact holders of ordinary shares and/or ADSs by mail, telephone, telex, telegraph, facsimile and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the U.S. Offer to beneficial owners. Innisfree will receive reasonable and customary compensation for its services as Information Agent, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection therewith, including certain liabilities under the U.S. federal securities laws.
E.ON 12 has retained Mellon Investor Services LLC to act as U.S. Tender Agent in connection with the U.S. Offer. The U.S. Tender Agent has not been retained to make solicitations or
41
recommendations in its role as tender agent. Mellon will receive reasonable and customary compensation for its services as U.S. Tender Agent, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection therewith, including certain liabilities under the U.S. federal securities laws.
E.ON 12 has retained Santander Investment S.A. to act as Spanish Tender Agent in connection with the Spanish Offer. Santander Investment S.A. will receive reasonable and customary compensation for its services as Spanish Tender Agent, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection therewith.
A request will be made to Endesa for the use of its shareholder and security position listings for the purpose of disseminating this U.S. Offer to holders of Endesa securities. This Offer to Purchase, the Share Form of Acceptance, the ADS Letter of Transmittal and the Notice of Guaranteed Delivery will be mailed or furnished to record holders of Endesa securities and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the shareholder and ADS holder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of Endesa securities. All expenses incurred in connection therewith will be borne by E.ON 12.
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SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF E.ON 12 AND E.ON
1. DIRECTORS AND EXECUTIVE OFFICERS OF E.ON. The following table sets forth the name, present principal occupation or employment, and material positions held during the past five years, of each director and executive officer of E.ON. E.ON is managed by a Board of Management (Vorstand) and a Supervisory Board (Aufsichtsrat).
Board of Management
| | | | | | | | | |
| Name | | | Year first
elected | | | Title | | | Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years |
| Dr. Wulf H. Bernotat | | | 2003 | | | Chairman and CEO of E.ON | | | Chief Executive Officer; Corporate Communications, Corporate and Public Affairs, Investor Relations, Supervisory Board Relations, Strategy, Executive Development, Audit; formerly Chairman of the Board of Management of Stinnes AG |
| | | | | | | | | | Supervisory Board Memberships/Directorships: |
| | | | | | | | | | E.ON Energie AG (Chairman), E.ON Ruhrgas AG (Chairman), Allianz SE, Bertelsmann AG, Metro AG, RAG Aktiengesellschaft (Chairman), RAG Beteiligungs AG (Chairman), E.ON Nordic AB (Chairman), E.ON UK plc (Chairman), E.ON US Investments Corp. (Chairman), E.ON Sverige AB (Chairman) |
| Dr. Burckhard Bergmann | | | 2003 | | | Member of the Board of Management of E.ON | | | Upstream Business, Market Management, Group Regulatory Management; Chairman of the Board of Management and Chief Executive Officer of E.ON Ruhrgas AG |
| | | | | | | | | | Supervisory Board Memberships/Directorships: |
| | | | | | | | | | Thüga AG (Chairman), Allianz Lebensversicherungs-AG, MAN Ferrostaal AG, Akkumulatorenwerke Hoppecke Carl Zoeller & Sohn GmbH, Jaeger Akustik GmbH & Co. (Chairman), Nord Stream AG, OAO Gazprom, E.ON Ruhrgas E & P GmbH (Chairman), E.ON Ruhrgas Gastransport AG & Co. KG (Chairman), E.ON UK plc, ZAO Gerosgaz (Chairman; in alternation with a representative of the foreign partner) |
| Christoph Dänzer-Vanotti | | | 2006 | | | Member of the Board of Management of E.ON | | | Labour Relations, Personnel, Infrastructure and Services, Procurement, Organization |
|
43
| | | | | | | | | |
| Name | | | Year first
elected | | | Title | | | Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years |
| Lutz Feldmann | | | 2006 | | | Member of the Board of Management of E.ON | | | Mergers & Acquisitions, Corporate Development, Legal Affairs, Integration |
| | | | | | | | | | Supervisory Board Memberships/Directorships: |
| | | | | | | | | | E.ON Energie AG |
| Dr. Hans Michael Gaul | | | 1990 | | | Member of the Board of Management of E.ON | | | Controlling/Corporate Planning, M&A, Legal Affairs; formerly Member of the Board of Management of VEBA AG |
| | | | | | | | | | Supervisory Board Memberships/Directorships: |
| | | | | | | | | | E.ON Energie AG, E.ON Ruhrgas AG, Allianz Versicherungs-AG, DKV AG, RAG Aktiengesellschaft, RAG Beteiligungs AG, DKV AG, Volkswagen AG, E.ON Nordic AB, E.ON Sverige AB. |
| Dr. Marcus Schenck | | | 2006 | | | Member of the Board of Management of E.ON | | | Chief Financial Officer; Finance, Accounting, Taxes, Risk Management, IT |
| | | | | | | | | | Supervisory Board Memberships/Directorships: |
| | | | | | | | | | E.ON Ruhrgas AG, E.ON Risk Consulting GmbH, E.ON Audit Services GmbH, NIK Finanzkontor GmbH |
| Dr. Johannes Teyssen | | | 2004 | | | Member of the Board of Management of E.ON | | | Downstream Business, Market Management, Group Regulatory Management; Chairman of the Board of Management and Chief Executive Officer of E.ON Energie AG |
| | | | | | | | | | Supervisory Board Memberships/Directorships: |
| | | | | | | | | | E.ON Bayern AG (Chairman), E.ON Hanse AG (Chairman), Salzgitter AG, E.ON Nordic AB, E.ON Sverige AB |
|
The business address for each of the individuals listed above is E.ON-Platz, 1, D-40479, Düsseldorf, Germany. Each of the individuals listed above is a German citizen.
44
Supervisory Board
| | | | | | | | | |
| Name | | | Year
first
elected | | | Title/Business Address | | | Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years |
| Ulrich Hartmann | | | 2003 | | | Chairman of the Supervisory Board of E.ON | | | Retired Co-Chief Executive Officer of E.ON AG; formerly Chairman of the Board of Management and Chief Executive Officer of VEBA AG |
| | | | | | | E.ON AG E-ON-Platz, 1, D-40479, Düsseldorf, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | Deutsche Bank AG, Deutsche Lufthansa AG, Hochtief AG, IKB Deutsche Industriebank AG (Chairman), Münchener Rückversicherungs-Gesellschaft AG, Henkel KGaA |
| Hubertus Schmoldt | | | 1996 | | | Deputy Chairman of the Supervisory Board of E.ON | | | Chairman of the Board of Management of Industriegewerkschaft Bergbau, Chemie, Energie |
| | | | | | |
IG Bergbau, Chemie, Energie Königsworther Platz 6-30167 Hannover, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | Bayer AG, DOW Olefinverbund GmbH, Deutsche BP AG, RAG Aktiengesellschaft, RAG Beteiligungs-AG |
| Dr. Karl-Hermann Baumann | | | 2000 | | | Member of the Supervisory Board of E.ON | | | Formerly Chairman of the Supervisory Board of Siemens AG; formerly member of the Board of Management of Siemens AG |
| | | | | | | Siemans AG Wittelsbacherplatz 2, 80333 München, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | Linde AG, Schering AG |
| Dr. Rolf-E. Breuer | | | 1997 | | | Member of the Supervisory Board of E.ON | | | Formerly Chairman of the Supervisory Board of Deutsche Bank AG and formerly Spokesman of the Board of Management of Deutsche Bank AG |
| | | | | | | Deutsche Bank AG Taunusanlage 12, 60325 Frankfurt, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | Landwirtschaftliche Rentenbank |
| Dr. Gerhard Cromme | | | 1993 | | | Member of the Supervisory Board of E.ON | | | Chairman of the Supervisory Board of ThyssenKrupp AG |
| | | | | | |
Thyssenkrupp AG August-Thyssen-Straße 1, 40211 Düsseldorf, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | Allianz SE, Axel Springer AG, Deutsche Lufthansa AG, Siemens AG, Suez S.A., BNP Paribas S.A., Compagnie de Saint-Gobain |
|
45
| | | | | | | | | |
| Name | | | Year
first
elected | | | Title/Business Address | | | Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years |
| Gabriele Gratz | | | 2005 | | | Member of the Supervisory Board of E.ON | | | Chairwoman of the Works Council of E.ON Ruhrgas AG |
| | | | | | |
E.ON Ruhrgas AG Huttropstr. 60, 45138 Essen, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | E.ON Ruhrgas AG |
| Wolf-Rüdiger Hinrichsen | | | 1998 | | | Member of the Supervisory Board of E.ON | | | Vice-Chairman of the Group Workers’ Council of E.ON |
| | | | | | | E.ON AG E-ON-Platz, 1, D-40479, Düsseldorf, Germany | | | |
| Ulrich Hocker | | | 1998 | | | Member of the Supervisory Board of E.ON | | | General Manager of German Investor Protection Association |
| | | | | | |
Deutsche Schutzvereinigung Für Wertpapierbesitz e.V. Hamborner Straße 53, 40468 Düsseldorf, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | Feri Finance AG, Karstadt Quelle AG, ThyssenKrupp Stainless AG, Gartmore SICAV, Phoenix Mecano AG (Chairman), Deutsche Telekom AG |
| Eva Kirchhof | | | 2002 | | | Member of the Supervisory Board of E.ON | | | Diploma-Physicist |
| | | | | | | E.ON Sales & Trading GmbH
Karlstarße 6 80335 München, Germany | | | |
| Seppel Kraus | | | 2003 | | | Member of the Supervisory Board of E.ON
| | | Secretary of Labor Union
Supervisory Board Memberships/Directorships:
|
| | | | | | | IG BCE, ZBZ Bayern Schwanthalerstraße 64, 80336 München, Germany | | | Wacker-Chemie AG, Novartis Deutschland GmbH, Hexal AG |
Prof.
Dr. Ulrich
Lehner | | | 2003 | | | Member of the Supervisory Board of E.ON | | | President and Chief Executive Officer, Henkel KGaA |
| | | | | | |
Henkel KGaA Henkelstraße 67, 40191 Düsseldorf, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | HSBC Trinkaus & Burkhardt KGaA, Ecolab Inc., Novartis AG, The DIAL Corporation (Chairman) |
|
46
| | | | | | | | | |
| Name | | | Year
first
elected | | | Title/Business Address | | | Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years |
| Dr. Klaus Liesen | | | 1991 | | | Member of the Supervisory Board of E.ON
Ruhrgas AG Huttropstraße 60, 45138 Essen, Germany | | | Honorary Chairman of the Supervisory Board of E.ON Ruhrgas AG; formerly Chairman of the Supervisory Board of Ruhrgas AG |
| Erhard Ott | | | 2005 | | | Member of the Supervisory Board of E.ON
Veridi Bundesverwaltung Paula-Thiede-Ufer 10, 10179 Berlin, Germany | | | Member of the Board of Management of Unified Services Sector Union (ver.di) |
| Hans Prüfer | | | 2006 | | | Member of the Supervisory Board of E.ON | | | Chairman of the Group Workers’ Council of E.ON
Supervisory Board Memberships/Directorships:
|
| | | | | | | E.ON AG Jacobistraße 3, 31157 Sarstedt, Germany | | | E.ON Energy AG |
| Klaus-Dieter Raschke | | | 2002 | | | Member of the Supervisory Board of E.ON | | | Chairman of the Combined Works Council, E.ON Energie AG |
| | | | | | |
E.ON Energie AG Brienner Str. 40, 80333 München, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | E.ON Energie AG, E.ON Kernkraft GmbH |
| Dr. Henning Schulte-Noelle | | | 1993 | | | Member of the Supervisory Board of E.ON | | | Chairman of the Supervisory Board of Allianz SE; formerly Chairman of the Board of Management of Allianz AG |
| | | | | | | Allianz SE Königinstraße 28, 80802 München, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | Allianz SE (Chairman), Siemens AG, ThyssenKrupp AG |
| Prof. Dr. Wilhelm Simson | | | 2003 | | | Member of the Supervisory Board of E.ON | | | Retired Co-Chief Executive Officer of E.ON AG; formerly Chairman of the Board of Management and Chief Executive Officer of VIAG AG |
| | | | | | | c/o E.ON Energie AG Nymphenburger Straße 39, 80335 München, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | Frankfurter Allgemeine Zeitung GmbH, Merck KGaA, Freudenberg KG & Co., Jungbunzlauer Holding AG, E. Merck OHG, Hochtief AG |
|
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| | | | | | | | | |
| Name | | | Year
first
elected | | | Title/Business Address | | | Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years |
| Gerhard Skupke | | | 2003 | | | Member of the Supervisory Board of E.ON | | | Chairman of the Central Works Council, E.ON edis AG |
| | | | | | |
E.ON Edis AG Langewahler Straße 60, 15517 Fürstenwalde / Spree, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | E.ON edis AG |
| Dr. Georg Frhr. von Waldenfels | | | 2003 | | | Member of the Supervisory Board of E.ON | | | Former Minister of Finance of the State of Bavaria; Attorney |
| | | | | | |
c/o Clifford Chance Partnergesellschaft Theresienstraße 4 – 6, 80333 München, Germany | | | Supervisory Board Memberships/Directorships: |
| | | | | | | Georgsmarienhütte Holding GmbH, GI Ventures AG (Chairman) |
| Hans Wollitzer | | | 2007 | | | Member of the Supervisory Board of E.ON
E.ON Bayern AG Prüfeningstraße 20, 93049 Regensburg, Germany | | | Chairman of the Central Works Council of E.ON Energie AG |
|
Each of the individuals listed above is a German citizen.
Under German law, the shareholders elect the members of the Supervisory Board. As set out in Section 13 (‘‘Certain Information Concerning E.ON 12 and E.ON’’) of this Offer to Purchase, on June 16, 2000, VIAG AG merged into VEBA AG, with VEBA AG as the surviving entity. Following the merger, VEBA AG was renamed E.ON AG. As part of the merger agreement between the two companies, the German State of Bavaria originally had the right to recommend to the Supervisory Board one candidate to be elected as a member of the Supervisory Board. The Supervisory Board was entitled to, but had no legal obligation to, propose the election of the candidate to the shareholders. The shareholders were, in turn, entitled to elect or not elect the candidate to the Supervisory Board. As a result of this provision, Dr. Georg Frhr. von Waldenfels, attorney in private practice, was recommended by the German State of Bavaria in 2003 as a member of the Supervisory Board of E.ON. This provision was in force as long as the State of Bavaria held more than 4% of E.ON’s share capital. However, according to publicly available information, the German State of Bavaria currently owns only 2.4% of E.ON’s share capital, and consequently this provision is no longer in force.
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2. DIRECTORS AND EXECUTIVE OFFICERS OF E.ON 12. The following table sets forth the name, present principal occupation or employment, and material positions held during the past five years of each director and executive officer of E.ON 12. E.ON 12 is governed by two Managing Directors. The business address and telephone number of each such person is c/o E.ON-Platz, 1, D 40479, Düsseldorf, Germany. Each of the individuals listed below is a German citizen.
| | | | | | | | | |
| Name | | | Year first
elected | | | Title | | | Present Principal Occupation or Employment;
Material Positions Held During the Past Five Years |
| Mr. Karl-Heinz Feldmann | | | 2006 | | | Senior Vice President and General Counsel of E.ON | | | General Counsel of Stinnes AG (1999-2001)
Head of Corporate Development of Stinnes AG (2001-2002)
Legal department of E.ON (from 2003)
General Counsel of E.ON (from 2004) |
| Dr. Patrick Wolff | | | 2006 | | | Vice President of E.ON | | | Corporate Attorney of E.ON AG (2000-2005)
Vice President General Legal Affairs of E.ON AG (from 2005) |
|
To the best of our knowledge, none of the members of the Board of Management or Supervisory Board of E.ON or the Managing Directors of E.ON 12 listed has during the last five years (a) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, United States federal or state securities laws or a finding of any violation of United States federal or state securities laws.
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SCHEDULE II
INFORMATION CONCERNING INTERESTS HELD, DIRECTLY OR INDIRECTLY, BY E.ON’S SUBSIDIARIES AND AFFILIATES, IN THE SHARE CAPITAL OF ENDESA
E.ON Energie A.G. and some of its subsidiaries own 100% of several investment funds which, as of the date of this Offer to Purchase, jointly hold a total of 541,879 ordinary shares, representing 0.051% of Endesa’s share capital, as set forth in the following table.
| | | | | | | | | |
| Fund | | | Owner company of the fund | | | Number of shares |
| EDENFONDS | | | E.ON e.dis AG | | | | | 21,288 | |
| MONFONDS 1 | | | BKB AG | | | | | 46,000 | |
| GRP FONDS | | | E.ON Energie AG
E.ON Kernkraft AG (KKS)
Gemeinschaftskraftwerk Weser GmbH | | | | | 257,600 | |
| SPS FONDS | | | E.ON Avacon AG
E.ON e.dis AG
E.ON Westfalen Weser AG
E.ON Hanse AG
E.ON Kernkraft AG (KKS)
LandE GmbH | | | | | 16,357 | |
| HANSE FONDS 1 | | | E.ON Energie AG
E.ON e.dis AG
E.ON Westfalen Weser AG
E.ON Hanse AG
E.ON Mitte AG | | | | | 8,041 | |
| HANSE FONDS 2 | | | E.ON Energie AG
E.ON e.dis AG
E.ON Avacon AG
E.ON Hanse AG
LandE GmbH | | | | | 7,309 | |
| Activest A 190 FONDS | | | E.ON Energie AG
E.ON Bayern AG
E.ON Avacon AG
E.ON Thüringer Energie AG | | | | | 128,600 | |
| SEW-FONDS | | | Gemeinschaftskraftwerk Weser GmbH | | | | | 20,000 | |
| GSB FONDS | | | Gemeinschaftskraftwerk Weser GmbH | | | | | 19,500 | |
| WEB FONDS | | | Gemeinschaftskraftwerk Weser GmbH | | | | | 17,184 | |
| TOTAL | | | | | | | | 541,879 | |
|
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The following table sets forth transactions in the ordinary shares carried out by the funds listed in the table above during the twelve-month period prior to the date of this Offer to Purchase:
| | | | | | | | | | | | | | | |
| Buying/selling fund | | | Owner company of
the fund | | | Date | | | Purchase/ sell | | | Number of
shares | | | Price per
share (in €) |
| EDENFONDS | | | E.ON e.dis AG | | | 9/28/2005 | | | Purchase | | | 3,095 | | | 22.30 |
| 2/3/2006 | | | Sell | | | 1,807 | | | 24.87 |
| GRP FONDS | | | E.ON Energie AG | | | 4/19/2005 | | | Purchase | | | 800 | | | 16.69 |
| E.ON Kernkraft AG | | | 4/19/2005 | | | Purchase | | | 4,000 | | | 16.69 |
| Gemeinschaftskraft-werk Weser GmbH | | | 4/26/2005 | | | Purchase | | | 98,400 | | | 16.94 |
| 5/10/2005 | | | Purchase | | | 94,200 | | | 17.15 |
| 8/22/2005 | | | Purchase | | | 60,200 | | | 18.44 |
| HANSE FONDS 1 | | | E.ON Energie AG | | | 2/9/2005 | | | Sell | | | 34,323 | | | 17.74 |
| E.ON e.dis AG | | | 7/19/2005 | | | Purchase | | | 2,364 | | | 18.69 |
| E.ON Westfalen Weser AG |
| E.ON Hanse AG |
| E.ON Mitte AG |
| HANSE FONDS 2 | | | E.ON Energie AG | | | 2/9/2005 | | | Sell | | | 27,825 | | | 17.74 |
| E.ON e.dis AG | | | 7/19/2005 | | | Purchase | | | 2,134 | | | 18.69 |
| E.ON Avacon AG |
| E.ON Hanse AG |
| LandE GmbH |
| SPS FONDS | | | E.ON Avacon AG | | | 2/08/2006 | | | Purchase | | | 16,357 | | | 25.07 |
| E.ON e.dis AG |
| E.ON Westfalen Weser AG |
| E.ON Hanse AG |
| E.ON Kernkraft AG |
| LandE GmbH |
| ACTIVEST A 190 FONDS | | | E.ON Energie AG | | | 3/11/2005 | | | Purchase | | | 22,700 | | | 17.12 |
| E.ON Bayern AG |
| E.ON Avacon AG |
| E.ON Thüringer Energie AG |
| HANFONDS 1 | | | E.ON Energie AG | | | 9/23/2005 | | | Sell | | | 63,259 | | | 21.58 |
| E.ON Kernkraft AG |
| MEA-FONDS | | | E.ON Mitte AG | | | 2/2/2005 | | | Sell | | | 500 | | | 17.65 |
| KHS 3 FONDS | | | E.ON Westfalen Weser AG | | | 4/20/2005 | | | Sell | | | 6,645 | | | 16.81 |
| SEW-FONDS | | | Gemeinschaftskraft-werk Weser GmbH | | | 2/1/2005 | | | Purchase | | | 25,000 | | | 17.40 |
| 10/1/2005 | | | Sell | | | 28,000 | | | 22.26 |
| GSB-FONDS | | | Gemeinschaftskraft-werk Weser GmbH | | | 2/1/2005 | | | Purchase | | | 31,000 | | | 17.40 |
| 10/1/2005 | | | Sell | | | 34,000 | | | 22.26 |
| WEB-FONDS | | | Gemeinschaftskraft-werk Weser GmbH | | | 5/9/2005 | | | Purchase | | | 12,500 | | | 17.27 |
| 7/25/2005 | | | Purchase | | | 4,684 | | | 18.49 |
|
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In addition, Dr. Ulrich Schöler, Managing Director of E.ON Ruhrgas International and also member of the Board of Management or the Supervisory Board of several E.ON Ruhrgas group companies, holds 600 ordinary shares. These ordinary shares were acquired before January 1, 2004. Dirk Steinheider, Director of Business Steering of E.ON Energie AG, holds 100 ordinary shares, which were acquired before January 1, 2004. Prof. Gerhardt Wolff, member of the Supervisory Board of the Erdgasversorgungsgesellschaft Thüringen-Sachsen mbH (EVG), sold 250 ordinary shares on December 30, 2005, at a price per share of €22.20.
Except as indicated above, as of the date of this Offer to Purchase, none of E.ON 12, E.ON, the Managing Directors of E.ON 12, the members of the Board of Management or Supervisory Board of E.ON, any associate of the foregoing or any majority-owned subsidiary of E.ON 12 beneficially owns, whether directly, indirectly or in concert with others, any ordinary shares or ADSs.
Likewise, none of E.ON 12, E.ON, the Managing Directors of E.ON 12, the members of the Board of Management or Supervisory Board of E.ON, any associate of the foregoing or any majority-owned subsidiary of E.ON or E.ON 12 has purchased or sold, whether directly, indirectly or in concert with others, any ordinary shares or ADSs within the twelve months preceding the date of this Offer to Purchase.
E.ON has only provided information in this Schedule II with respect to companies of the E.ON group over whose investment decisions E.ON is able to exercise significant influence, but does not include the E.ON UK pension trust, the E.ON U.S. pension trust and the E.ON Energie pension funds and trusts or other entities over which E.ON is not able to exercise such influence.
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Facsimile copies and manually executed copies of the Share Form of Acceptance and manually executed copies of the ADS Letter of Transmittal, in each case, properly completed and duly executed, will be accepted. The Share Form of Acceptance, ADS Letter of Transmittal and Notice of Guaranteed Delivery and any other required documents should be sent or delivered by each shareholder of Endesa or by such shareholder’s broker, dealer, commercial bank, trust company or other nominee to the U.S. Tender Agent at one of its addresses set forth below.
THE INFORMATION AGENT FOR THE U.S. OFFER IS:
501 Madison Avenue, 20th Floor
New York, NY 10022
HOLDERS OF ORDINARY SHARES AND ADSs CALL TOLL-FREE
(888) 750-5834
BANKS AND BROKERS CALL COLLECT
(212) 750-5833
THE U.S. TENDER AGENT FOR THE U.S. OFFER IS:
| | | | | | |
BY MAIL
Mellon Investor Services LLC
Attn. Reorganization Dept.
PO Box 3301
South Hackensack, NJ 07606 | | | BY HAND
Mellon Investor Services LLC
Attn. Reorganization Dept.
120 Broadway, 13th Floor
New York, NY 10271 | | | BY OVERNIGHT DELIVERY
Mellon Investor Services LLC
480 Washington Blvd.
Mail Drop - Reorg
Jersey City, NJ 07310
Attn. Reorganization Dept.
27th Floor |
|
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY)
(201) 680-4626
CONFIRMATION RECEIPT OF FACSIMILE BY
TELEPHONE ONLY
(201) 680-4860
Questions and requests for assistance may be directed to the Information Agent at its telephone number or address set forth above. Additional copies of this Offer to Purchase, the Share Form of Acceptance, the ADS Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may also be obtained from the Information Agent, and will be furnished promptly at E.ON 12’s expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the U.S. Offer.
