SSE sparks merger talks over £1bn retail arm
27th April 2019 | Residential Energy
SSE, one of Britain’s biggest gas and electricity suppliers, is scrambling to find a buyer or merger partner for its £1bn retail division months after scrapping a tie-up with rival Npower. Sky News has learnt that SSE – formerly known as Scottish & Southern Energy – has held preliminary talks with a number of other utility providers, including TalkTalk, in recent weeks.
SSE has promised to update investors on the future of its retail business when it reports full-year results on May 22. City insiders said this weekend it has stepped up efforts to find a suitor for the divisions which supplies close to 6m households across Britain. Alistair Phillips-Davies, SSE’s chief executive, is said to value the unit at about £1bn, a sum which is higher than some analysts believe it is worth.
A source close to SSE, which is being advised by Credit Suisse and Morgan Stanley, said it had floated the idea of a potential merger with TalkTalk, the broadband and telecoms supplier, in the last fortnight. However, a tie-up between the two companies is regarded as highly unlikely to proceed. The source said that other utility providers had also been sounded out about their appetite for a deal.
SSE said in December that it would look for “an alternative transaction” for its Energy Services business when it announced that the merger with Npower was being scrapped. It added that demerging the division and gaining either a premium or standard listing on the London Stock Exchange was also under consideration.
City analysts and investors believe that outcome, too, has only a remote prospect of being achieved, partly because of the balance sheet constraints resulting from the amount of collateral that retail energy suppliers are required to hold. Ring-fencing SSE Energy Services while retaining ownerships is another possibility for the FTSE-100 group.
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