It’s increasingly fashionable for companies to be broken up as activist investors put pressure on businesses to extract hidden value. Not every campaign works, but activists have a pretty good hit rate.
SSE has already gone through some steps to streamline its operations with the sale of its retail energy division, but Elliott Management believes it can go further by selling its renewable energy operations.
“Having kept quiet for a while the market speculated on what might happen, SSE has now put out a statement saying there is no decision to break up its business,” said AJ Bell’s Russ Mould.
“There are two ways to interpret this statement.
“On one hand, the words ‘there is no decision’ might imply that some consideration might still be given to a break-up – as in there is no decision yet.
“On the other hand, the company says it already has a clear strategy and has promised to give all the details on spending and the how this might drive growth at the half year results in November. It doesn’t want an activist investor getting in its way before investors have had a chance to digest the plan for future value generation.
“A lot of the big oil companies are in the market for renewable energy assets as they seek to transition away from fossil fuels, which means there would be eager buyers for SSE’s renewable energy operations.
“Activist investors are known for their persistence so one can be sure that Elliott won’t give up following the energy group’s latest statement.”