SSE plc has entered into an agreement to sell its Contracting business to the Aurelius Group at an enterprise value of £27.5m. The consideration comprises:
- An upfront consideration of £17.5m, which will be adjusted for working capital, separation costs and debt like items;
- A £5m loan note to be issued by Aurelius on completion which will be repayable in 2026, unless prepaid earlier, with a fixed PIK interest rate of 6% payable; and
- Up to £5m in an earn out based upon Financial Year 2021/22 EBITDA performance
The planned disposal is part of SSE’s strategy to focus on its core networks and renewables businesses, supported by businesses clearly complementary to that core. It is also designed to give Contracting a strong platform for future success outwith SSE.
SSE Contracting is one of the biggest contracting businesses in the UK providing mechanical, electrical and street lighting services. It is the largest street light contractor in the UK and its HV (high voltage) engineers install energy infrastructure for clients including schools, hospitals and substations. Its rail division delivers mechanical, electrical and civils activity for the likes of Transport for London and Network Rail.
The sale process is expected to be completed by the end of June 2021, when around 1,900 Contracting employees will work under the new ownership.
Gregor Alexander, SSE’s Finance Director, said: “Aurelius has a proven record of actively supporting the companies they work with, so this change of ownership should provide a good home for the Contracting business. It leaves the SSE group more focused around its renewables and networks core, allowing the Contracting business to thrive in an environment better suited to its ambitions.”
Tristan Nagler, UK Managing Director of Aurelius, said: “As other sellers before, SSE recognised Aurelius to be the partner of choice to execute the divestment of a promising business unit, establishing SSE Contracting as a standalone business so it can fully take advantage of new growth opportunities.”
As part of the Transaction:
- Completion is subject to a number of Condition Precedents which include Irish Competition and Consumer Protection Commission filing and clearance.
- In order to ensure a smooth transition, for a period post completion, SSE will continue to provide certain services to SSE Contracting under a Transitional Services Agreement.
- Certain defined benefits pension liabilities of SSE Contracting, relating to 91 employees, will remain with SSE as part of the transaction under a Managed Service Agreement.
- There will be no immediate impact on customers after completion; the SSE brand will be operated by SSEC under license for a period, allowing time for a phased and carefully managed migration and continued high standards of customer service.
- SSE and Aurelius will put in place appropriate security arrangements to support any ongoing guarantor provisions that are in place for PFI Streetlighting agreements.
- The transaction agreement has a long-stop date of 31 July 2021 for satisfaction of the conditions precedent with completion to follow thereafter.
Note: SSE Contracting comprises two business units: SSE Contracting Limited and Airtricity Utility Solutions (AUS) Limited.
PwC Corporate Finance acted as lead financial advisor to SSE throughout the transaction and PwC Transaction Services provided Vendor Assistance services.