SSE Plc, a UK based energy firm headquartered in Scotland, is reportedly set to merge its household power supply & retail division with Npower Limited, a division of Innogy SE, to expand its power & gas retail operations in the UK. The agreement resulting in the formation of a new business is apparently projected to help generate a revenue of nearly GBP 11 billion for the latter through combined sales. The joint venture will possess the entire combined consumer base of 13 million customers. Experts claim that the merger will produce a behemoth of the same business size as British Gas, a key energy service provider in the UK.
With declaration of the merger deal, the stock price of SSE increased by over 3%. Business analysts have claimed that the merger between the two major players will reduce the number of big energy players in the UK from six to five. Alongside, it has also been predicted that the transaction will be finalized at most by 2018 or in the first half of 2019. According to reliable sources, the merger between the retail divisions will help Innogy and SSE generate GBP 10.9 billion in pro-forma sales along with the operating profit of GBP 123 million in 2017.
For the record, in 2016, SSE had reached a substantial revenue margin of 6.9%, while Npower had suffered the operating losses of GBP 90 million and lost approximately 80,000 consumers. Experts have projected that the merger will now help the latter rebrand its image as SSE may further expand its presence.
Post the successful completion of the merger, it is estimated that the midcap or small shares of the group will be listed on the London Stock Exchange. It will also facilitate SSE to hold 65.6% of the shares in the new business with Innogy occupying the rest. If however, the former fails to get the deal approved by the British authorities by 31st July 2018, Innogy will receive GBP 60 million break fee.