Centrica shares popped up more than 17% after it agreed to sell NRG Energy to Direct Energy, its North American energy business, for $ 3.6 billion in cash.
Houston-based Direct Energy provides electricity, natural gas and home services to consumers and businesses in North America. It operates in all 50 US states and 6 Canadian provinces. The purchase of NRG’s (ticker: NRG) direct energy closes by the end of the year.
The sale is reported by Centric (CNA.UK) to receive £ 6.77 to £ 47.14 (one pound sterling approximately $ 1.29) on the London Stock Exchange. NRG stock added more than 1.1% to the New York Stock Exchange in trading on Friday morning.
The sale will create a lean centric, providing electricity and gas to businesses and consumers in the UK, Ireland and North America. Centrica also owns British Gas, Bord Gas Energy and Dyno Rod. According to the statement, the transaction will allow Centric to focus on its main domestic markets in the UK and Ireland.
“This settlement is tied to our strategy of becoming a simple, lean-to-thin business and furthermore it will strengthen our balance sheet and remove the source of income volatility,” said Centric Group CEO Chris O’Shea.
Centric wants to shed other businesses. The UK company said in a separate statement that it plans to restart the sale of Spirit Energy E&P. Centrica also wants to divest its stake in Britain’s nuclear fleet, but said it is also on break.
The sale of Direct Energy comes after Centric announced in June that it plans to cut more than 5,000 jobs in an organizational restructuring. Earlier this year, Centrica reported a major loss of £ 1.1 billion in 2019 due to the UK’s energy price cap and falling gas prices. A spokesperson said that the Kovid-19 epidemic has exacerbated these problems.
NRG provides electricity and natural gas to Princeton, NJ’s more than 3.7 million residential, small business and commercial and industrial customers. A purchase of Direct Energy will broaden its retail business, adding more than three million customers in 50 states and Canada. A statement from NRG said that direct energy acquisition is expected to generate $ 300 million in annual savings and will also increase free cash flow.
The Direct Energy purchase follows NRG’s $ 300 million acquisition of Stream Energy’s retail electricity and natural gas business in 2019.
The sale of Centrica’s Direct Energy is also the latest transaction in the energy sector. Earlier this week, Chevron (CVX) said it would buy Noble Energy, an oil and gas producer, for $ 13 billion.
Citi and Credit Suisse provided financial advice to the NRG, while Latham and Watkins and Baker Bots acted as legal counsel.
Write Louisa Beltran at [email protected]