City comment: SSE’s management should be wary of Elliott Advisors’ blasting tanks
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Of course, Elliott Advisors isn’t going quietly.
The activist is kicking up an almighty fuss after SSE declined to take its private advice and spin-off its renewables business. Not only does the decision beggar belief, keeping SSE intact calls into question the competence of management, we are told. Time to get in some new directors who know what they are doing, say Elliott.
This is all textbook stuff. Elliott founder Paul Singer has been called “the world’s most feared investor” and one profile noted his “uniquely adversarial” approach.
Elliott doesn’t just park its tanks on the lawn — it starts blasting.
Behind the bluster, the US activist may have a point. Investors around the world are clamouring to put their money into green investments. Separating renewables could make it easier to attract cash. That would mean faster growth and a more competitive business.
SSE argues just the opposite: a smaller, stand alone business would struggle to raise as much money. The combined balance sheet is its secret weapon.
Both sides have to convince investors. Elliott has a nice number to dangle in front of them: it reckons its plan would take shares to £21 from their current £16.27 — another £5 billion on the market value.
SSE’s stock didn’t budge much this morning but is up 5% since reports of Elliott’s involvement first broke. Tellingly, SSE dropped 4% on the day it announced its new strategy. Elliott may find plenty of shareholders with a sympathetic ear.
