Uniper, Fortum should explore tie-up to end deadlock - investors

* Partial tie-up makes sense - Deka, Union Investment

* See strategic fit in Russia, Sweden

* Uniper, Fortum at loggerheads over future set-up

FRANKFURT/DUESSELDORF, Germany, June 12 (Reuters) - Some small shareholders in Uniper see room for a tie-up with top shareholder Fortum, joining activist calls to end a standoff after the Finnish group’s acrimonious failed takeover attempt.

Fortum has been barred by Russian regulators from expanding its 49.99% stake in Uniper which has also opposed a takeover, fearing that the Finnish state-owned firm could break it up and put its investment grade credit rating at risk.

Germany’s utility sector is undergoing a radical overhaul, most notably through the planned break-up of Innogy by parent RWE and rival E.ON, a move that could leave Uniper on the sidelines.

“Fortum’s interest in Uniper does make sense for some parts, but not for the whole business,” Winfried Mathes, analyst at Deka Investment, a top-20 shareholder of Uniper, said, adding that Russia and Sweden represented the best strategic fit.

Uniper operates 10.7 gigawatt (GW) of capacity, mostly gas, in Russia, which would complement Fortum’s 4.8 GW local combined heat and power fleet. In Sweden, where both own hydroelectric plants, Fortum could double its capacity to 9.1 GW by integrating the 9.7 billion euro ($11 billion) group.

At the heart of the Russian stand-off is a water testing licence owned by Uniper’s Russian subsidiary Unipro, which Moscow has deemed to be strategic.

Activist funds Elliott and Knight Vinke, which together own nearly 23% of Uniper, have grown impatient over the status quo, which so far appears unlikely to change after a recent falling out.

Knight Vinke, which called the situation “very worrying”, has said it will call an extraordinary general meeting in September if the situation remains unresolved.

And in a bid to end the spat, Fortum Chief Executive Pekka Lundmark raised the water-testing license in talks with President Vladimir Putin last week.

“With Fortum Uniper would have a broader set-up and therefore reduce its vulnerability to energy politics in Germany, which has caused a lot of unpleasant surprises,” Thomas Deser, senior fund manager at Union Investment, said.

But he questioned whether Uniper Chairman Bernhard Reutersberg, who took aim at Fortum in late May, would be the ideal person to mediate.

There are also concerns about Uniper’s ability to compete longer-term given its relatively small size.

Thomas Hechtfischer, managing director of shareholder advisory group DSW, which represents less than 1% of Uniper’s voting rights at its annual general meeting, said Uniper “may possibly be too small in the long-run”. ($1 = 0.8833 euros)

Editing by Alexander Smith