Just Energy Exploring Inorganic Growth, But Not Interested In Most Books Currently Out There

Just Energy said during an earnings call yesterday that it is exploring inorganic growth through acquisitions of several types of companies, including retail suppliers active in North America, but the company said that most of the books currently out there are not of interest to it.

Just Energy is exploring acquisitions of North American retail suppliers, international retail suppliers, and, "strategic accelerants " -- the latter category being anything that can deliver a broader customer experience through products or new offerings.

Just Energy emphasized that any inorganic growth would be disciplined and would not stray from the company's commitment to its improved credit metrics and balance sheet.

Of the three acquisition categories, Just Energy CFO Patrick McCullough said that North American retail is, "probably where the opportunities are for us," but noted that the majority of the books currently available do not align with Just Energy's strategy

What's Just Energy looking for?

McCullough explained: "If you could find a book that didn't have regulatory issues, that didn't have a lot of variable products, that didn't have, let's say, a declining customer base, so we had confidence that there was, let's say, sustainable growth that could be endured, those are the type of North American retailers that are interesting to us."

"Now I did not describe the majority of the available books or the majority of the companies that exist," McCullough said

"I just described a very, very small subset, so that's what we'll be looking for. We'll be looking for high quality companies that we can roll into the fold, and will not be looking to lever up to do that," McCullough said

However, Just Energy sees North American acquisitions as less challenging than European acquisitions, because the company is seeing higher multiples in Europe than in North America

"So it would be disruptive to shareholders if we were to buy a large, mature, profitable company in Europe right now. However, there are opportunities like we did in Germany [SWDirekt] where you have an earlier stage, pre-profit entity where you're not paying that multiple on a basis of a larger scale transaction," McCullough said

In contrast, in regards to North American targets, "We generally have a multiple advantage over most of the North American market. We are generally buying at larger scale, so there should be cost-of-goods-sold synergies. We're generally making more profit than average retailers and selling a much broader suite of products so we think there's longer term commercial synergies."

Regarding strategic accelerants, McCullough said that one avenue the company is seeking is, for Just Energy's commercial business, can Just Energy find CapEx-light ways to further engage with its commercial accounts and create more value for them. To the extent Just Energy finds otherwise attractive strategic accelerant targets but which are CapEx-heavy, Just Energy would seek a partnership with such companies rather than an acquisition.