Spark Energy eyes major growth plans as institutional investors back MBO
Jun 15, 2016 by Spark
Spark Energy, the niche energy supplier to the lettings and social housing sectors, today (Wed 15th June 2016) announced that a management buyout of the company is close to completion.
The MBO is led by CEO Chris Gauld, who has held a senior position in the Scottish Borders-based company since its launch in 2007, and CFO Hamish Osborn.
Four large institutional investors, including a major UK pension fund, a European family office and a Middle Eastern investment bank, are backing the deal, which will dramatically increase the financial strength of the business, currently on course to deliver turnover of £125m in the year to end June 2016.
Whilst the value of the deal has not been disclosed, it would see Spark's original and current shareholders realising a return on their investments. It will also significantly increase access to growth capital, in order to allow rapid expansion. Chairman Sir Timothy Noble and his fellow non-executive directors will resign on completion of the deal.
The directors of Spark Energy are recommending the deal to its shareholders, who are being sent details today. The support of 75% of shareholders is required before the offer closes on July 14. If approved, the transaction is expected to be completed in August.
Spark Energy CEO Chris Gauld said: "This is the natural next phase in Spark’s evolution. Whilst we can be proud of our achievements so far, we have big plans for an exciting future.
“The new institutional backers have the extra financial strength and experience to enable us to fund and accelerate the next steps in our ambitious plans, and to realise our full potential.
“Our current investors have always been incredibly supportive of the business and helped management achieve better outcomes for customers, staff and our other stakeholders by providing extra capital as the business grew.
“We are confident that this deal will go through and excited about the opportunities ahead of us. We have plans to diversify our offer, to invest further in customer experience and to consider acquisitions and technology that serve to improve our performance and the convenience we offer to the tenants, landlords, agents and social bodies we serve.
"Spark's success owes much to our vibrant team of 350 staff, who live mostly near our Selkirk headquarters. I can assure them that our future lies firmly in the Borders, and that we will be looking to build our team in the months and years to come.
"We have recently strengthened our leadership team, recruiting high-level talent from the energy supply sector and beyond. Thanks to our investment in infrastructure and customer experience, we are well-positioned for further growth.
“There was a significant appetite from institutions keen to back our plans but Hamish and I feel very confident that we have the right partners in the group.
"I will be forever grateful to Sir Timothy, our board, Scottish Enterprise and the many investors who have supported us with their faith and their financial backing through our initial years of growth, and I'm very pleased that they will get the chance to be rewarded and to see the business continue to grow from our headquarters in the Scottish Borders.
“This MBO sees a natural evolution from the angel community to institutional investors. It’s the right time to set the business up for the opportunities ahead and the MBO provides the ideal vehicle to achieve our goals.”
Spark Energy chairman Sir Timothy Noble said: "If, as expected, the proposals are accepted, I will depart my role at Spark with great pride in what we have achieved together, and with pleasure that my fellow shareholders will have been rewarded for the confidence and courage they showed in supporting this company.
“When the business was founded in 2007, Spark was merely a concept with the aim of becoming a challenger brand in an industry completely dominated by the Big Six providers, and which has a regulatory environment so complex that it makes life very difficult for new entrants.
"The success of Spark Energy is a fine example of angel investment in action. Without the support of so many private individuals and Scottish Enterprise, who together invested more than £15m over a period of years, companies such as Spark would not be able to get off the ground, as the banks and other institutions are not prepared to provide such risky finance.
"Chris Gauld and Hamish Osborn have done a fine job with the support of the whole team in Selkirk and have repaid our faith. In growing Spark they have also reduced costs, improved service and helped give choice back to the customer in a niche area of the energy supply market."