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A strong believer in the benefits of fully-liberalized energy markets and industry consolidation, Wulf H. Bernotat had become CEO of E.ON, Europe’s second largest electricity company with the goal of making E.ON a global energy giant. He saw a golden opportunity in 2005 when Endesa, the leading Spanish electricity firm with substantial holdings in Latin America, was put into play following a takeover bid from Gas Natural, its much smaller, Barcelona-based rival. Endesa’s board had rejected the bid outright as too low and had vowed to defend the company’s independence. But by the end of the year, it had become clear that Endesa would need a partner to fight off the challenge. Bernotat sensed his chance – E.ON had sufficient financial resources and was poised and ready to execute a competing bid.  And while Manuel Pizarro, Endesa’s outspoken president, continued to tell shareholders and stakeholders alike that Endesa should remain independent, Bernotat knew the Spanish utility much preferred a deal with E.ON than to be acquired by its smaller local rival. He seized the chance and on February 21, 2006, E.ON offered €27.50 per share of Endesa, €6.20 more than Gas Natural’s September 5, 2005 bid.

It did not take long for the battle to turn ugly. From day one, Bernotat had faced numerous obstacles, including the Spanish government’s overt hostility to E.ON, a German company, taking over Endesa, a powerful Spanish multinational. The Spanish government was prepared to make sudden and seemingly arbitrary changes of Spanish law to subject foreign bidders to extra scrutiny, including a series of seemingly improvised merger conditions. The maneuverings by the Spanish authorities prompted a confrontation between the Spanish government and the European Commission and had led to a public sparring match between Spanish Prime Minister, José Luis Rodríguez Zapatero and German Chancellor Angela Merkel.

In spite of the conflicts, Bernatat was quite certain that E.ON would prevail, but then Acciona, a family-owned Spanish construction multinational with close ties to the government, announced that it had purchased significant shares of Endesa in the open market, becoming Endesa's largest shareholder.

As he huddled with his strategy team in Düsseldorf in early February 2007, Bernotat pondered his next move. Should he raise E.ON’s bid further to undercut Acciona? How much would he have to pay to secure control? Could he fight Acciona’s entry in the courts? Or had the time come to place a call to Chancellor Merkel in Berlin and openly ask for political support? Gazing out at the steadily flowing Rhine River from his ninth-floor office, Bernotat was determined to make the acquisition happen and write a new chapter in E.ON’s history.



The text of this case study was originally developed as a written case study by professors David Bach and David Allen at IE Business School, Madrid, Spain, with the assistance of research associates Christine Levy and Lynn Wang. Original version published 27 May 2009 by IE Publishing Department. María de Molina 13, 28006 – Madrid, Spain. © 2009 IE. Total or partial publication of this document without the express, written consent of IE is prohibited.

With the permission of IE, the original case study has been expanded by the Yale School of Management to this online version.

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David BachSenior Associate Dean for Executive MBA and Global Programs & Senior Lecturer, Yale School of Management