Germany will not let a financial investor buy RAG, a government official said on Friday, even though Cerberus Capital Management is ready to pay up to 8 billion euros ($10.65 billion) for the conglomerate.
The government official, who declined to be named, said RAG would float its non-coal businesses on the stock exchange as planned in a complicated transaction that will hive off liabilities for its loss-making coal mining operations.
"The (Cerberus) offer is pointless because a foundation for a share sale has been established and the state of North-Rhine Westphalia has committed itself to the sale," a separate source familiar with the situation said.
Another source familiar with the situation had said on Thursday that buyout firm Cerberus was bidding 8 billion euros for the RAG energy, property and chemical assets that are set to list next year in one of Germany's biggest post-war flotations.
In Duesseldorf, a spokesman for North Rhine-Westphalia state premier Juergen Ruettgers said German politicians knew of Cerberus's interest when they approved floating RAG. "Aware of the offer, we decided to make RAG an integrated, publicly listed company," the spokesman said. "This is the only path being taken."
The RAG listing has been a political hot potato because it paves the way for Germany to exit heavily subsidised mining of hard coal. Federal, state, company and union officials finally gave the green light on Wednesday evening.
Cerberus - which last month agreed to buy a majority stake in US carmaker Chrysler from DaimlerChrysler for $7.4 billion - has declined to comment on the matter.
RAG is owned by German utilities E.ON AG and RWE AG, along with steelmakers ThyssenKrupp AG and Arcelor Mittal. But all four companies have already committed themselves to selling their stakes for a symbolic one euro to rid themselves of RAG's potentially crippling liabilities from coal mining.
The stakes will go to a state-controlled foundation to be established by month's end, which would take over responsibility for the coal-mining pension and environmental liabilities. Proceeds from the flotation would finance the liabilities.
The flotation is expected to raise at least 5 billion euros, but would take place in tranches and let the foundation keep a stake in the listed company, thus taking in dividends that would help finance miners' pensions and environmental damage.