E.ON, Ovo to announce merger agreement next week - report

(Sharecast News) - Household energy suppliers E.ON and Ovo are reportedly targeting a merger announcement next week.

According to Sky News, E.ON and Ovo will announce a merger that would create a gas and electricity retailer serving nearly 10 million customers.

It was understood that German-owned E.ON and UK-based Ovo want to announce a deal in the coming days. One source cautioned that the timetable was provisional and could still slip.

If confirmed, it would come just over two weeks after Sky revealed the two were in advanced talks about a combination.

A takeover of Ovo by E.ON would create a group with nearly 10m customers, although Octopus Energy - which has about 8m - is likely to lay continued claim to the mantle of being Britain's biggest supplier by number of individual households.

E.ON has about 5.7m customers and Ovo about 4m.

Ovo has been trying to secure a capital injection or sale of its retail business for months, with industry regulator Ofgem having deemed it last year to be not in compliance with its capital adequacy regime.

Late last year, the company axed hundreds of jobs in a bid to cut costs as part of a revised business plan submitted to Ofgem focused on boosting the company's profitability.

That plan was said to include restrictions on taking on new customers while Ovo's finances are placed on a sustainable footing.