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    SSE, Innogy Cancel UK Merger

Summary

The two firms have called off plans to merge their UK retail businesses after over a year of preparations.

by: Mark Smedley

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NGW News Alert, Natural Gas & LNG News, Europe, Corporate, Mergers & Acquisitions, News By Country, Germany, United Kingdom

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SSE, Innogy Cancel UK Merger

UK energy marketer, SSE, and its German counterpart, Innogy, said December 17 that they have cancelled plans to merge their UK retail businesses.
 
Their decision comes despite the planned merger securing UK competition authority approval two months ago.  A month ago, SSE and Innogy admitted they were reopening talks  on the terms of their UK retail merger. When the two announce the planned UK merger in November 2017, they said SSE would have a 65.6% stake and Innogy 34.4%.
 
Innogy's retail chief operating officer, Martin Herrmann, said: "Adverse developments in the UK retail market and regulatory interventions such as the price cap have had a significant impact on the outlook for the planned retail company. We negotiated intensively with SSE on adjustments to the transaction as announced in November 2017. Unfortunately, we could not reach an agreement that was acceptable for both sides. We are now assessing the different options for our British retail business."
 
SSE's CEO, Alistair Phillips-Davies, acknowledged that it was uncomfortable making additional concessions: "This was not an easy decision to make, but we believe it is the right one." 
 
SSE said its board decided not to proceed with the transaction and that it will pursue 

other options, including a standalone demerger of its retail arm, a sale, or an alternative transaction.

 

Five months after Innogy and SSE agreed initial terms on the UK retail merger, larger German rival E.ON in March 2018 announced its plan to acquire Innogy en bloc, adding further uncertainty.

 

Innogy said that since 3Q 2018 it treated its UK retail division, known as 'npower', as a discontinued operation - and excluded its figures in its 2019 outlook: "From today’s perspective, including npower in innogy’s 2019 group figures would have a negative impact on adjusted Ebit [earnings before interest and tax] in the area of minus €250mn ($283mn)." 

 

 

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