Proposed Energy Supplier Merger Cancelled
The proposed merger between Big Six energy suppliers SSE and Npower has been abandoned. SSE had planned to merge its retail business with its energy supplying rival but has now withdrawn the proposal.
Had the companies merged, they would have combined to become the second largest energy supplier behind British Gas. However, ‘very challenging market conditions’ have put an end to their plans.
The major blow seems to have been struck by the recently implemented price cap.
Complex Transaction Not the ‘Right Deal To Do’
SSE’s Chief Executive is Alistair Phillips-Davies and he spoke of the decision to abandon the merger:
“This was a complex transaction with many moving parts. We closely monitored the impact of all developments and continually reviewed whether this remained the right deal to do for our customers, our employees and our shareholders.
“Ultimately, we have now concluded that it is not. This was not an easy decision to make, but we believe it is the right one.”
Mr Phillips-Davies also insisted that SSE would not make any hasty decisions about how to proceed, saying,
“We will take our time to think about it.”
Multiple Factors to Blame For Abandoned Merger
In statement by SSE Energy Services, the company declared it was no longer in the best interests of its customers, employees or shareholders to proceed with the proposed merger.
Many reasons were cited for the failure of the company to merge with Npower, with SSE’s official statement reading:
“The transaction has been impacted by multiple factors including the performance of the respective businesses, clarity on the final level of the default tariff cap, changing energy market conditions and the associated implications of these for both the joint business plan and the market in which the business would be operating.
“These implications meant the new company would have faced very challenging market conditions, particularly during the period when it would have incurred the bulk of the integration costs.”
SSE Currently Assessing Demerger Options
SSE has stated that it was now assessing all available options for the SSE Energy Services department. The SSE Energy Services department had been the section due to merge with Npower. Its future is now under something of a cloud as SSE contemplate listing it, selling it entirely or simply demerging. A demerger would see the SSE Energy Services department become a standalone company.
The future for Npower is also uncertain, with one possibility being that the firm is absorbed by E.ON. Even so, it is understood such a measure would involve years of restructuring.
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