(Adds analyst comment, details, background)
By Richa Naidu
Nov 20 Multi-utility provider Telecom Plus Plc
said it signed a 218 million pound ($351 million) deal
to buy back two units from Npower, nearly eight years after
selling them to the British arm of Germany's RWE AG.
Shares in Telecom Plus jumped more than 15 percent to a
life-high of 1735.45 pence on Wednesday morning, making the
stock the second biggest percentage gainer on the London Stock
The deal will improve energy margins by 4.25 percent and
allow the company to offer more competitive tariffs, Telecom
It also ensures a 20-year supply contract with Npower, said
Telecom Plus, which provides gas, electricity, fixed-line
telephone and broadband internet services.
The owner of the Utility Warehouse brand said it would raise
about 130 million pounds via two share issues, underwritten by
Peel Hunt, to partially fund the deal.
Telecom Plus said it would also use about 100 million pounds
from its loan facilities for the deal.
The acquisition is a major strategic move for Telecom Plus,
Edison Investment Research analyst Neil Shah said in a note.
"With some reinvestment in price, the company is now even
better placed to take advantage of consumer discontent around
the big six."
Britain's big six utilities, who together control 99 percent
of the retail market, are under fire from politicians for
increasting prices. Lawmakers have accused them of colluding to
produce above-inflation price rises that they unveiled just as a
Telecom Plus sold the two businesses, Electricity Plus
Supply and Gas Plus Supply, to Npower in February 2006 for a
"nominal" amount. (link.reuters.com/naz74v)
The transaction is expected to materially increase earnings
in the first financial year after completion, which is expected
by late December, the company said.
Telecom Plus also posted a 10 percent rise in first-half
adjusted pretax profit and raised its interim dividend by 23
Shares in Telecom Plus were up 15.2 percent at 1735.45 pence
at 1014 GMT.
($1 = 0.6210 British pounds)
(Reporting by Richa Naidu in Bangalore; Editing by Gopakumar