Perth-based energy giant SSE plc said on Friday it agreed to sell its energy retail arm SSE Energy Services to Ovo Group for an enterprise value of £500 million comprising £400 million cash and £100 million in loan notes.
The move allows SSE to focus on infrastructure, networks and renewables.
All of SSE Energy Services’ 8,000 employees will transfer to Ovo.
SSE Energy Services is the third-largest supplier in the GB energy market, supplying energy and related services to around 3.5 million household customers across Great Britain.
This equates to around 6.2 million household energy and related services accounts.
As well as electricity and gas, the business provides telephone, broadband, metering, boiler installation and maintenance services.
“Ultimately, this transaction would be another stepping stone towards the execution of SSE’s clearly articulated strategy, leaving a more focused group able to specialise in the low-carbon infrastructure needed now and in the future,” said SSE.
Completion of the transaction is expected in late 2019 or early 2020 and is subject to the necessary regulatory approvals.
On completion, the net cash proceeds of the transaction will be used to reduce SSE’s debt.
“We see this deal as positive for SSE as it gets rid of a business unit which has been a drag on the overall group and helps to refocus attention on the core business of Networks and Renewables,” wrote analysts at Bernstein.
SSE CEO Alistair Phillips-Davies said: “We have long believed that a dedicated, focused and independent retailer will ultimately best serve customers, employees and other stakeholders – and this is an excellent opportunity to make that happen.
“Ovo shares our relentless focus on customer service and has a bold vision for how technology can reshape the future of the industry.
“I’m confident that this is the best outcome for the SSE Energy Services business.
“Following the transaction, SSE will be able to give an even greater focus to delivering the low carbon infrastructure needed to help the UK reach net zero emissions.
“We have a clear strategy around developing, operating and owning renewable energy and electricity network assets, along with growing businesses complementary to this core.
“With a large and growing renewable energy pipeline and a leading position in the electricity networks needed to deliver low-carbon energy reliably to homes and businesses in an increasingly electrified economy, we are well placed to create value from the low-carbon transition.”
Credit Suisse and Morgan Stanley acted as SSE’s joint financial advisors and corporate brokers on this transaction.