Possible break-up of SSE in focus as Elliott builds up stake

Talks of a possible break-up of SSE were at the top of the agenda on Monday morning, after it emerged over the weekend that activist investor Elliott Management had built-up a stake in the power generator.

The FTSE 100 company’s shares jumped last Wednesday, after a post on the Betaville blog suggested that a large activist investor was building a stake, with the blog naming Elliott on Friday.

Those claims were reported by the Mail on Sunday over the weekend, with the newspaper saying it was not clear how big a holding Elliott had accumulated or what it was intending to do with its investment.

On Monday, the Times cited “leading analysts” as saying recent deals in the energy generation sector suggested that SSE’s “transaction-based” value could be 50% higher than its market capitalisation of £16bn.

Scotland-based SSE reported pre-tax profits of £2.5bn in its last financial year as it continued its offshore wind development strategy, with Bernstein Research saying in recent years that the company should consider selling a stake in, or entirely spinning off, its renewables operations.

Elliott Management, founded by billionaire investor Paul Singer in the late 1970s, has made waves in a number of large British companies in recent years.

It was successful in its campaign for Whitbread to sell the Costa Coffee chain in 2018, with the Times also noting that it has been “agitating for changes” at GlaxoSmithKline recently.

The newspaper noted that there was some chatter that SSE’s renewables division could be an attractive investment for an oil major looking to boost its green credentials, adding that Norwegian state oil company Equinor previously worked with the firm on gas and offshore wind projects.

“That may make sense to some people, I think it’s a distraction for us right now,” said SSE chief executive officer Alistair Phillips-Davies on the prospect of breaking off its renewables business in an interview with the Times in March.

“We don’t want to be sidetracked into spending 18 months internally arguing over who goes where.”

At 0935 BST, shares in SSE were up 3.2% at 1,596p.