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ESSEN/DUESSELDORF (Reuters) - Germany’s top utilities announced a multi-billion-euro revamp, with RWE (RWEG.DE) agreeing to sell control of Innogy (IGY.DE) to rival E.ON (EONGn.DE) in return for renewable assets, in the biggest overhaul of the sector since the country moved to exit nuclear power.

RWE logo in Essen, Germany, March 14, 2017. Reuters/Thilo Schmuelgen

The deal, which includes E.ON making a 5.2 billion euro ($6.4 billion) takeover offer to Innogy’s remaining owners, will effectively break up the network, renewables and retail energy firm that was carved out from RWE in 2016.

Chancellor Angela Merkel’s decision to abandon nuclear power after Japan’s Fukushima nuclear disaster of 2011 has forced the industry to radically restructure in order to survive and already caused major plant shutdowns and billions of euros of losses.

Through the takeover, which includes a share issue and asset swaps, E.ON would focus on prized regulated energy networks and customer service, while RWE will take on the renewables businesses of both E.ON and Innogy.

That would position RWE, which relies heavily on coal and gas-fired power plants, as a champion of Germany’s so-called ‘Energiewende’ - the transition away from fossil fuels towards a more sustainable mix of energy sources.

“This looks like an advantageous step for E.ON at first glance,” said Thomas Deser, fund manager at Union Investment, which holds shares in E.ON, RWE and Innogy.

“Through the renewable pipeline, RWE, too, should be able to offset its dwindling nuclear and lignite business as well as attract partners for the expansion of its wind business.”

COMPLEX DEAL

The all-German transaction comes less than two years after E.ON and RWE both split up their businesses to separate legacy fossil fuel power plants from more promising networks and renewable assets.

It will also result in RWE - Germany’s biggest electricity producer - owning a 16.67 percent stake in E.ON by way of a 20 percent capital increase. RWE will pay another 1.5 billion euros to E.ON to close a valuation gap that results from the complex structure of the asset swaps.

The transactions, which still require approval from the company’s boards, face scrutiny by European Union regulators as well as from Germany’s Federal Cartel Office, which did not respond to an emailed request for comment.

The European Commission declined to comment.

FILE PHOTO: Innogy logo in Essen, Germany, March 14, 2017. Reuters/Thilo Schmuelgen/File Photo

Innogy, in which RWE owns 76.8 percent, has been in turmoil since Chief Executive Peter Terium resigned in December in the wake of a profit warning and Chief Financial Officer Bernhard Guenther fell victim to a recent acid attack.

Innogy has also been the target of persistent takeover talk, with sources saying recently that RWE had talked to France’s Engie (ENGIE.PA) and Italy’s Enel (ENEI.MI) about a possible asset-swap deal.

Other firms linked to Innogy included Spain’s Iberdrola (IBE.MC) and Australian bank

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