Three weeks ahead of a non-binding bid deadline in German energy and gas trading giant Uniper’s sale track, sources familiar with the process are vying to set the narrative for their preferred pathway of either M&A or a re-IPO.

“Honestly, it’s still totally open – early in the auction and the IPO track has not really kicked off,” one source said. As for which way it will go, it “depends on who you talk to” with advisors surrounding the deal “talking their own book,” he added.

JPMorgan and UBS are running the auction track, with Citi, Deutsche Bank and UBS appointed global coordinators on any potential re-IPO.

“I would not write off the M&A track,” this source added. Codenamed Project Libertas, round one in the sale effort kicked off with a process letter dated 6 August reaching interested parties, a second source said. First round bids are reportedly due 21 September.

Various interested parties have been biding their time to secure more information with a view to potentially forming consortiums to bid for the company, a third source – aligning with buyside interests – said.

“People are hanging in to see if they’re taken to the next round,” he added, noting this would offer a further opportunity to team up.

Brookfield and CPP Investments have already joined forces in their approach for Uniper and other interested parties include various sponsors and large institutional investors: Apollo Global, Ardian, Caisse de dépôt et placement du Québec and GIP; and strategics EPH (owned by Czech investor Daniel Křetínský), Equinor, Fortum, Jera, RWE, TotalEnergies and Vattenfall, according to a local report.

The degree to which some suitors’ involvement at this early stage is motivated by the benefits of having access to information regarding Uniper is an open question, a fourth source argued.

RWE’s presence may reflect ministers’ preference for a “German AG” solution, the third source said. However, it would be quixotic for RWE to pursue Uniper having only just completed a 180-degree turn on its holding in transmission player Amprion, this source said. RWE sold a 74.9% stake in Amprion in 2011 before building its stake to 55% earlier this year.

The German government nationalised Uniper in 2022 amid the energy crisis following the Russian invasion of Ukraine, reaching an agreement with the European Commission under its state aid framework to reduce its holding to a maximum of 25% plus one share by 31 December 2028. The government is committed to retaining that maximum shareholding, a spokesperson for the German Ministry of Finance confirmed.

That would leave the government in control of a blocking minority, likely limiting the potential bidder pool, this news service has reported.

Indeed, any strategic investors taking a majority stake would be unable to make major decisions without German state backing, with political pressure potentially intolerable if the owner sought to cut staff or move the company’s Düsseldorf headquarters, the fourth source said. Financial buyers will have to contend with a hostile works council and unions opposed to the privatisation, he added.

A state privatisation sale track “can’t be a sham process” but ultimately, a re-IPO is more likely to succeed, this source argued.

Any bidder outside the European Union would additionally face higher foreign direct investment (FDI) scrutiny, a fifth source familiar with the matter noted. Major US sponsors cannot simply take a majority stake, he argued. “It’s too politically sensitive,” he said.

That FDI screening risk only increases if parties do form a consortium, a sixth source said. Uniper is too large for a single sponsor to acquire – and multiple buyers commensurately increase the regulatory scrutiny, he argued.

“With that systemic risk, I highly doubt bidders will find it compelling enough to consider an acquisition. I don’t believe in a successful outcome of any dual track – it’s going the re-IPO route,” this source said.

Re-IPO an easier disposal pathway?

Against this backdrop, the German government has shifted towards a preference for a re-IPO, the sixth source said, citing contact with officials. Indeed, there is a rumour the government would prefer an investor to take a 25% stake as a cornerstone, ahead of a re-IPO and follow-on transactions offloading a further 50%, the third source said.

It would not be easy to find a cornerstone willing to take as much as 25% of Uniper, the first source cautioned.

The equity story for a re-IPO is clear, the fourth source said. Uniper retains a rump listing of 0.88%, with a market capitalisation of EUR 18.8bn.

“At present, the share price doesn’t tell you anything,” the fourth source added. But price discovery via a re-IPO would crystallise the necessary discount, he argued. Applying a typical 30% IPO discount would value Uniper at approximately EUR 13.2bn.

There are comparatively few opportunities to invest in a generator of scale in Europe and the rollout of sovereign AI via data centres within the EU means there is a yearning from institutions to “go long power”, he said.

When Uniper was spun off from E.ON in 2016, an IPO was not considered a viable option given the complexities prior to the separation around the handling of nuclear assets and the eventual perimeter of the group, the first source said. But it is true that Germany’s need for greater energy capacity to improve industrial competitiveness and drive AI rollout means “an IPO equity story is easier now,” he added.

There have been early discussions with potential investors in the re-IPO and engagement is ongoing, a seventh source said. With the M&A process “in the background” and the government needing a viable route to offload nearly 75% of Uniper, clarity will likely emerge around the time of first round bids and into early October, this source argued.

A re-IPO won’t happen before 2027, this source said.

Even a sale would likely slip to January 2027 at the earliest, the third source added. One game-changer for Uniper’s attractiveness would be if the group could win approval to build two new gas-fired power plants in Germany’s upcoming capacity auction, in which bids close on 8 September.

Coupled with the end of acquisition restrictions at the end of this year (as had been agreed with the EC at nationalisation), if Uniper emerges triumphant and allocates some EUR 2.5bn in capex for those undertakings, there could be a further ballast for any re-IPO equity story, this source added.

But as things stand, there are several layers of uncertainty, he conceded.

The German Ministry of Finance spokesperson said: “To comply with this exit commitment, the federal government is considering both a disposal via the capital markets and off-market sale options.”

JPMorgan, UBS, Citi and Deutsche Bank declined to comment. Uniper did not reply to requests for comment.