The Memo: Octopus takes Bulb into its arms: shining light on the takeover set to change the UK’s energy sector

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Octopus takes Bulb into its arms: shining light on the takeover set to change the UK’s energy sector

Alice Gregory - 12th December 2022

The acquisition of Bulb by Octopus Energy is the latest M&A deal to hit the headlines. Energy company Bulb was founded in 2015 in the hope of providing a better service and prices for customers. Investors and consumers were sold, and it became the fastest growing energy company in the UK, garnering 1.5 million customers. Sadly however, Bulb burned bright and died fast. The company went into special administration last year to ensure that customers could continue to have energy supplied to their homes. So, how did the company get into hot water?

Part of the problem was what critics have described as an ‘ineffective’ hedging strategy. Hedging is essentially a risk management strategy meant to protect against possible future losses, but Bulb’s policy wasn’t enough to shield them from the dramatically rising costs of energy. Bulb collapsed – the largest energy company to fall victim to the energy crisis – and has been under special administration ever since. The Office for Budget Responsibility estimated that public ownership of the company has cost taxpayers an eye-watering £6.5bn.

This is where Octopus comes in. A number of energy suppliers were offered the chance to acquire Bulb, but Octopus ended up being the sole bidder. The takeover will cost them a lump sum of £100-200 million, although it’s unclear as to when they will have to repay energy costs. The deal was recently approved in court and set to go ahead by 20th December. However the approval prompted rivals British Gas, e.on, and Scottish Power to challenge the court’s decision by requesting a judicial review, which will check whether the government followed legal procedures when selling Bulb. Not only will this delay the takeover, but it could also cost taxpayers significantly more. If the Octopus deal does go through, it will result in the third largest energy supplier in the UK.

If you’re interested: read more about energy law here.