Shares in SSE will be in sharp focus today after reports that Elliott
Management, the activist investor, has amassed a stake in the FTSE 100 energy
group.
The reports will fuel speculation over whether SSE, which operates wind farms,
gas power plants and electricity networks, could be broken up or taken over.
Leading analysts say that recent deals in the sector imply the company could
have a “transaction-based valuation” 50 per cent higher than its £16 billion
market capitalisation.
SSE’s stock jumped on Wednesday after the Betaville blog reported rumours that
one of the world’s largest activist investors was building a stake, and the
shares rose further late on Friday when the blog named Elliott. They closed at
£15.46 on Friday, up more than 6 per cent over the week.
The Mail on Sunday reported those claims yesterday, saying it was not clear
how big a stake Elliott had amassed or what its intentions were, but adding
that Elliott may launch a campaign to force a shake-up if SSE’s management
failed to engage with it.
Elliott Management, founded in 1977 by Paul Singer, 76, a billionaire
investor, is based in New York. In 2018 it successfully campaigned for
Whitbread to sell Costa Coffee and in recent months it has been agitating for
changes at GlaxoSmithKline.
SSE, based in Perth, reported pre-tax profits of £2.5 billion last year and
has built a position as one of the world’s biggest offshore wind developers.
Bernstein Research has argued since 2019 that SSE should consider spinning off
or selling a stake in its renewables business. Last month Deepa Venkateswaran,
an analyst at Bernstein, said that the renewables division was implicitly
trading at only 38 per cent of its “transaction value”. She argued that SSE
had a “transaction-based valuation” of £23 a share, which she said “would be
relevant if an integrated energy major were to bid and dispose of assets like
the networks division”.
Some believe that SSE’s renewables division could be attractive to an oil
major chasing ambitious green targets. SSE is also developing gas-fired power
plants with carbon capture and storage, another area of focus for oil
companies. Equinor, Norway’s state oil producer, has worked with SSE on
offshore wind and gas projects in Britain.
However, most big oil companies are not interested in acquiring electricity
networks. “Buying the whole company would bring plenty of strings attached,”
an executive at one oil group said.
Asked about the possibility of separating out its renewables business,
Alistair Phillips-Davies, SSE chief executive, told The Times in March: “That
may make sense to some people, I think it’s a distraction for us right now. We
don’t want to be sidetracked into spending 18 months internally arguing over
who goes where.”
Elliott and SSE declined to comment.