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The History of Creation of a Stock Corporation E.on Ag

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E.ON AG

E.ON AG is a stock corporation organized under the laws of the Federal Republic of Germany. It is based in Düsseldorf, Germany. However, the company was established as a result of a merger of another two German companies.

The State of Prussia established a company called VEBA in 1929 when it consolidated state-owned coal mining and energy interests. Ownership of VEBA was transferred from the disformed Prussian state to the Federal Republic of Germany. VEBA was partially privatized in 1965. It was left 40.2 percent share to the German government. However, the full privatization took place in 1987 when the German government finally got rid of the last 25.5 percent share, and sold it to the public. After the whole privatization process, VEBA AG transormed into a management holding company, with respect on business strategic goals and leadership purposes.

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VEBA AG merged with VIAG AG in June 16, 2000. VIAG AG is another German company which was an industrial leader on the German market. The companies decided to fully rename their united company, and this is how E.ON AG was “born”. This merger of the two companies (VEBA and VIAG) has established the third largest industrial group in Germany, acoording to their sales of 446.4 billion and capitalization of the market in 2003.

PowerGen PLC

Powergen was formed in 1989 as a Public Limited Company. It was fully owned by the UK government and acquired about 50% of the Central Electricity Generating Board generating capacity. Robert Malpas was Chairman of the Group from 1989 to 1991. However, in 1991, almost 60% of the company was sold to private investors, and later, another 40% were sold in 1995. Powergen announced in early 2000 that it had reached a deal to buy an American LG&E Energy Corporation. Through this deal, Powergen wanted to expand internationally and to get a bigger market share in the UK. However, the company had too many financial problems and they could not operate on the market the way they planned.

On April 9, 2001, E.ON made a its first proposal of 765 pence (412.19) per share to the shareholders of the British utility Powergen. Another part of negotiation was to clarify all the necessary steps for the merger, including approval of the local authorities, also from the European Comission and the Office of Gas and Electricity markets in the United Kingdom. Because the American LG&E Energy Corporation was owned by Powergen, it was also necessary to deal with U.S. regulatory authorities.

After negotisting and managing all the necessary steps with documentation, E.ON and Powergen merged under the ‘‘scheme of arrangement’’ which was regulated by the court and included the participation of the major shareholders who agreed on the merger. On July 1, 2002, E.ON the acquisition of Powergen was fully comleted.

The reason for the merger

E.ON successfully crossed the ocean and became a global player in the energy market, buying in the summer of 2002 the British power generating company PowerGen. The main goal of this deal was the purchase of the American LG & E Energy, located in Kentucky (USA), owned by PowerGen.

E.ON’s CEO Ulrich Hartmann estimates the purchase of the British company as nothing more than creating a springboard for an attack in the American region. In the near future, it is planned to spend another 10 billion euros here to purchase energy corporations – Cinergy and Allegheny Energy.

E.ON selected a very good time for climbing the American scene. After the bankruptcy of Enron (which was also called “The Collapse of the Wall Street Darling” and the disclosure of numerous abuses in the national energy market, there was a deficit of energy capital. US energy companies were forced to reduce the number of new projects by one third during that year. And exactly at that moment the German concern

E.ON appears, ready to fill the vacuum created on the American market. Together with E.ON its main competitor (another German energy concern RWE) has also established a good market share on the U.S energy market at that time. E.ON wants to expand internationally beyond all the borders. Thus, the company considers also the countries of Scandinavia, Benelux and Eastern Europe as priority areas for business development.

However, the most important part of the global energy plan of the German energy giant is not geographic, but industry penetration. In the year 2003, E.ON also merged with RUHRGAS, which controls 13% of the European gas market.

The critical aspects of the intercultural post merger integration considering: Team development of employees of two different companies

Staff forms the backbone of any organization. People are the creators of organizations, determine their goals, choose methods, carry out functions aimed at realizing the goals. When a merger is created among different cultures, it becomes difficult manage. E.ON company employs 13,000 staff, 9,000 of whom are based in the UK (E.ON Website).

An important sign was the PowerGen’s announcement that the job cuts are not expected, describing it as “good news for UK jobs” and a “platform for growth rather than for cost cuttings”. This factor was good for creating comfortable conditions for employees who might be afraid to loose their jobs in the company. This is a big aspect of motivation, since having a fear of loosing position could be demotivating for people within the company and could affect the whole business plant. E.ON did not only mention that the merger will not affect the job cuts, but it will also expand the borders for employee’s self-development. With this step, the company improved the common spitit inside the organization.

Personnel in the entire E.ON company are distinguished by the following basic categories: managers, specialists, employees, workers, depending on employee’s professions, specialties and qualifications. After the mergers with Powergen and Ruhgas the company could expect some missunderstanding among their staff and the key goals. In 2003, E.ON implemented and communicated the new business strategic project. The project was called “On.Top”. It involved all the executives of all major plants of E.ON and discussions were about the current position of the company, it’s corporate strategy and image, design of organizational structure and E.ON’s strategic goals.

As a result, the “On.Top” project decided to integrate a new business model with a clear focus on power and gas. By creating this project, the company could successfully create clear goals and communicate these to each and every chairman of each and every plant. This step is important in creating a united organizational culture, where everybody understands the main purpose of the company and shares the same mission, vision and same values. Chairmen could later successfully communicate these goals further to their subbordinates who could communicate it even further, awaring everyone within the organization about particulat sets of goals and objectives, tasks and ways of implementation.

However, in January 2010, E.ON UK announced the closure of its Rayleigh Customer Service Centre and the loss of 600 jobs. This announcement was immideately criticised by local citizens and commercial institutions. It was also mentioned in the critique that the company wants to decrease its costs and people are victims in this situation. The company had to recall its announcement, since the reaction of the whole British society was negative. This was strategically wrong step towards employees’ motivation. However, the company later stated that it was a wrong leak of information which was created by dishonest journalists.

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