Possible Engie offer for Innogy could stoke M&A in utilities, Goldman says

Engie was considering tabling a take-over offer for German renewable energy utility Innogy, according to people familiar with the matter, which according to analysts might act as a catalyst for the entire utilities sector.

The deliberations are preliminary and might not result in a formal offer being made, Bloomberg reported on Monday citing people familiar with the matter.

Indeed, a final decision to proceed had not been taken.

Innogy's majority owner, RWE, declined to comment, opting instead to repeat that "in principle" it had margin to sell more shares in its subsidiary - until its stake reached 51.0% - from about 77.0% at present.

On Tuesday, RWE chief Rolf Martin Schultz said his company was looking at various strategic options.

The utilities sector was likely to see "large, game-changing" M&A, he said.

In January, the French state reduced its interest in Engie, selling 4.1% of its equity.

"As for the Telecom sector in 2014-15 large scale M&A could highlight the value case for the Utilities sector: most companies are at a discount vs. history and the market based on 2017E P/E. European Utilities currently yield >5% (2017E) and grow earnings in mid-single digit. Also, as explained in our “Power Shift report, we believe that transitioning to a decarbonized economy will allow utilities to deliver secular top-line growth, thanks to a capex super-cycle in grids & renewables," analysts at Goldman Sachs said in a research note on Monday.

Goldman Sachs acted as an adviser to RWE when it spinned-off Innogy in January.