Centrica wants to raise £750m to buy two companies and pay down debt
Update: Centrica's share price dropped more than 10 per cent today on the news it is issuing 350m shares – around seven per cent of current share capital – to help finance two major acquisitions and pay down debt.
British Gas' parent company is hoping to raise £350m needed to complete the purchase of two companies and a further £400m for lowering net debt.
The two "highly attractive" acquisitions are Neas Energy, which was announced on 21 April, for £170m plus working capital of around £30m and a second "customer-facing acquisition", which is also nearing completion, expected to cost around £150m. "The company believes these two acquisitions are among the most attractive in their respective sectors", Centrica said.
Both "deliver leading capabilities and double-digit percentage EBITDA growth potential, and will immediately contribute to earnings and cash flow once the transactions have closed", Centrica said.
The placing would also help it to retain its credit rating while the sector was suffering from falling prices and "a challenging external environment", the energy giant added.
"Although the company could operate effectively with lower credit ratings, it continues to believe that the targeted strong investment grade credit ratings are most efficient for Centrica's business model, given the scale of its energy procurement activities and the resultant need for access to cost-effective short-term sources of liquidity to manage collateral requirements," the firm said this morning.
"In addition, while the group continues to explore all options for repositioning its E&P business, the external environment means this is not straightforward, and reallocation of resources towards its customer-facing businesses is currently running below targeted levels."
Goldman Sachs and UBS are acting as joint bookrunners and corporate brokers in connection with the placing.
Investors seemed unconvinced, however: Centrica's share price was down 6.8 per cent in early trading. By early afternoon, it had fallen 10.8 per cent.