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Octopus Energy is close to clinching a takeover of stricken rival Bulb in a deal that will crystallise up to £4bn of losses for British taxpayers.

Sky News has learnt that ministers at the Treasury and the Department for Business, Energy and Industrial Strategy (BEIS) have been told that a sale of Bulb’s 1.6m-strong customer base is now the optimal outcome.

Industry sources said this weekend that the government and Bulb’s special administrator, Teneo Financial Advisory, were preparing to sign a binding agreement to sell the company to Octopus Energy by the end of this month.

The transaction, which is said to have the backing of industry regulator Ofgem, would be targeted for completion in December, according to one of those insiders.

If completed, it would end nearly a year of uncertainty over the fate of Bulb, Britain’s seventh-largest residential power supplier at the point of its collapse.

The government has already been forced to spend billions of pounds buying gas to supply Bulb customers because the company did not hedge its purchases in order to fix its cost base.

Wholesale gas prices have soared over the last year, with Vladimir Putin’s invasion of Ukraine having a particularly pronounced impact on global energy markets.

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Sky News revealed during the summer that Octopus Energy, run by Greg Jackson, was seeking a £1bn taxpayer funding package to seal the takeover of Bulb.

That would allow the buyer to secure sufficient forward supplies of gas to steer the company through the winter months.

Octopus intends to repay the roughly-£1bn government funding over a period lasting a number of months, according to sources close to the situation.

An energy industry expert said on Saturday: “Under public ownership, Bulb has been unhedged and will have cost the taxpayer billions.

“Fixing its trading in an orderly way will take several months to avoid moving the market and making things even more expensive for everyone.”

Insiders said the sale to Octopus would deliver the best achievable financial outcome for taxpayers, while also giving certainty to Bulb customers.

Mr Jackson’s company is expected to pay between £100m and £200m to take on Bulb’s customer base, with a separate profit-share agreement giving the government a return for several years on earnings from Bulb customers.

Kwasi Kwarteng, the chancellor, and Jacob Rees-Mogg, business secretary, are likely to be asked to sign off the deal in the next three weeks.

Bulb’s collapse in November 2021 was the most significant among dozens of supplier failures, with Ofgem, the industry regulator, facing heavy criticism for its approach to licensing new entrants to the market.

The independent Office for Budget Responsibility said in March that the bailout of Bulb would require more than £2bn to cover its operating losses, although that figure is since understood to have soared.

Nevertheless, it is still dwarfed by the cost of subsidising household and business energy bills for the next six months, which the Centre for Economics and Business Research, a think-tank, recently estimated at in the region of £30bn.

Liz Truss’s administration is seeking long-term gas supply deals with foreign states but has been warned by Treasury officials that it faces paying a “security premium” because of elevated current prices, reports said this week.

In Bulb’s case, the profit-share agreement, which would last several years, would enable the government to recoup a small part of the cost to taxpayers.

Some sector executives have estimated that Bulb is losing as much as £5m every day because of its failure to hedge forward gas purchases.

Octopus Energy’s swoop on its competitor in would take its customer base to approximately 5m British households and cement its status as one of the most important utilities operating in the UK.

Founded by Mr Jackson, it has raised more than £1bn from a swathe of blue-chip investors.

It recently completed a $550m fundraising, with $325m committed to support the growth of its UK and international energy technology platform, Kraken.

The accountancy firm KPMG is advising Octopus Energy on the talks about a takeover of Bulb.

Octopus Energy declined to comment on Saturday, while a government spokesman said: “The Special Administrator of Bulb is required by law to keep costs as low as possible.

“We continue to engage closely with them to ensure maximum value for money for taxpayers.”

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Barclays fined £40m over ‘reckless’ financial crisis capital raising

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Barclays fined £40m over 'reckless' financial crisis capital raising

Barclays has been fined £40m over capital raising that averted its need for taxpayer aid during the 2008 financial crisis.

The Financial Conduct Authority (FCA) found that the bank should have disclosed more details to the stock market about the £11.8bn in funding, from Qatari and other sovereign investors, that it had previously described as “reckless” and lacking integrity.

The penalty followed a protracted investigation that began in 2013 but was held up by criminal proceedings brought by the Serious Fraud Office that led to the acquittal of all defendants charged, including Barclays.

A decision by the bank not to refer the FCA’s enforcement case to an Upper Tribunal meant that the watchdog’s planned fine could be imposed.

Its regulatory action concerned Barclays’ navigation of the events of 2008 when the-then Labour government took huge stakes in major lenders, including Lloyds and RBS – now NatWest – to prevent a collapse of the banking system.

The FCA said of its action: “The events in 2008 were of national importance as banks sought emergency recapitalisation.

“The FCA has a primary objective to ensure market integrity. Banks should treat their obligations to the market and shareholders seriously.”

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Barclays was yet to comment.

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‘When you hit profits, you hit growth’: Businesses criticise biggest budget tax increase in decades

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'When you hit profits, you hit growth': Businesses criticise biggest budget tax increase in decades

Tax rises announced during the recent budget will hit businesses rather than encourage growth, the head of one of the UK’s most prominent business groups will warn on Monday.

The Confederation of British Industry (CBI) has joined a choir of voices opposing Chancellor Rachel Reeves’s fiscal measures, which the Labour Party claims are needed to plug a £22bn “black hole” left by 14 years of Tory government.

Labour put growth at the heart of their campaigning during the last general election, but business believe the £40bn tax rises announced last month – the largest such increase at a budget since John Major’s government in 1993 – will stifle investment.

Rain Newton-Smith, who heads the CBI, is expected to say at the group’s annual conference in London that “too many businesses are having to compromise on their plans for growth”.

She will say: “Across the board, in so many sectors, margins are being squeezed and profits are being hit by a tough trading environment that just got tougher.

“And here’s the rub, profits aren’t just extra money for companies to stuff in a pillowcase. Profits are investment.”

Ms Newton-Smith will add: “When you hit profits, you hit competitiveness, you hit investment, you hit growth.”

The Office for Budget Responsibility (OBR), which monitors the government’s spending plans and performance, has previously said most of the burden from the tax increase will be passed on to workers through lower wages, and consumers through higher prices.

Last week, dozens of retail bosses signed a letter to the chancellor warning of dire consequences for the economy and jobs if she pushes ahead with budget plans.

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Up to 79 signatories joined British Retail Consortium’s (BRC’s) scathing response to the fiscal announcement, which claimed Labour’s tax rises would increase their costs by £7bn next year alone.

It warned that higher costs, from measures such as higher employer National Insurance contributions and National Living Wage increases next year, would be passed on to shoppers and hit employment and investment.

The letter, backed by the UK boss of the country’s largest retailer Tesco, said: “The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”

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From October: ‘Raising taxes was not an easy decision’

‘Businesses will now have to make a choice’

A few days after the budget, Chancellor Reeves admitted she was “wrong” to say higher taxes were not needed during the election campaign – as she warned businesses may have to make less money or pay staff less to cover a tax increase.

But she claimed the previous government had “hid” the “huge black hole” in finances and she only discovered the extent of it once her party was voted in.

She told Sky News’ Sunday Morning With Trevor Phillips: “Yes, businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth.”

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ITV back in spotlight as suitors screen potential bids

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ITV back in spotlight as suitors screen potential bids

Potential suitors have again begun circling ITV, Britain’s biggest terrestrial commercial broadcaster, after a prolonged period of share price weakness and renewed questions about its long-term strategic destiny.

Sky News has learnt that a number of possible bidders for parts or all of the company, whose biggest shows include Love Island, have in recent weeks held early-stage discussions about teaming up to pursue a potential transaction.

TV industry sources said this weekend that CVC Capital Partners and a major European broadcaster – thought to be France’s Groupe TF1 – were among those which had been starting to study the merits of a potential offer.

The sources added that RedBird Capital-owned All3Media and Mediawan, which is backed by the private equity giant KKR, were also on the list of potential suitors for the ITV Studios production arm.

One cautioned this weekend that none of the work on potential bids was at a sufficiently advanced stage to require disclosure under the UK’s stock market disclosure rules, and suggested that ITV’s board – chaired by Andrew Cosslett – had not received any recent unsolicited approaches.

That meant that the prospects of any formal approach materialising was highly uncertain.

The person added, however, that Dame Carolyn McCall, ITV’s long-serving chief executive, had been discussing with the company’s financial advisers the merits of a demerger or other form of separation of its two main business units.

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Its main banking advisers are Goldman Sachs, Morgan Stanley and Robey Warshaw.

ITV’s shares are languishing at just 65.5p, giving the whole company a market capitalisation of £2.51bn.

The stock rose more than 5% on Friday amid vague market chatter about a possible takeover bid.

Bankers and analysts believe that ITV Studios, which made Disney+’s hit show, Rivals, would be worth more than the entire company’s market capitalisation in a break-up of ITV.

People close to the situation said that under one possible plan being studied, CVC could be interested in acquiring ITV Studios, with a European broadcast partner taking over its broadcasting arm, including the ITVX streaming platform.

“At the right price, it would make sense if CVC wanted the undervalued production business, with TF1 wanting an English language streaming service in ITVX, along with the cashflows of the declining channels,” one broadcasting industry veteran said this weekend.

“They would only get the assets, though, in a deal worth double the current share price.”

Takeover speculation about ITV, which competes with Sky News’ parent company, has been a recurring theme since the company was created from the merger of Carlton and Granada more than 20 years ago.

ITV said this month that it would seek additional cost savings of £20m this year as it continued to deal with the fallout from last year’s strikes by Hollywood writers and actors.

It added that revenues at the Studios arm would decline over the current financial year, with advertising revenues sharply lower in the fourth quarter than in the same period a year earlier because of the tough comparison with 2023’s Rugby World Cup.

Allies of Dame Carolyn, who has run ITV since 2018, argue that she has transformed ITV, diversifying further into production and overhauling its digital capabilities.

The majority of ITV’s revenue now comes from profitable and growing areas, including ITVX and the Studios arm, they said.

By 2026, those areas are expected to account for more than two-thirds of the group’s sales.

This year, its production arm was responsible for the most-viewed drama of the year on any channel or platform, Mr Bates versus The Post Office.

In its third-quarter update earlier this month, Dame Carolyn said the company’s “good strategic progress has continued in the first nine months of 2024 driven by strong execution and industry-leading creativity”.

“ITV Studios is performing well despite the expected impact of both the writer’s strike and a softer market from free-to-air broadcasters.”

She said the unit would achieve record profits this year.

ITV and CVC declined to comment, while TF1, RedBird and Mediawan did not respond to requests for comment.

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