LDC To Beat Miliband Freeze With uSwitch IPO

By Mark Kleinman, City Editor

An investment firm controlled by the taxpayer-backed Lloyds Banking Group is examining a stock market listing of the price comparison website uSwitch just months after acquiring a majority stake.

Sky News understands that LDC has begun tentatively sounding out institutional investors about a flotation of uSwitch that would take place ahead of next May's general election.

Ed Miliband, the Labour leader, has pledged to freeze energy bills for 15 months if he forms the next government, a decision which could curtail the number of households which change providers during that period.

USwitch is understood to derive a significant proportion of its revenue from gas and electricity switching, with profits last year understood to have hit £19m, well ahead of management expectations.

A new framework for energy switching has been introduced in recent months with the result that more than 250,000 customers move to another provider every month, according to the industry lobbying group Energy UK.

A uSwitch spokesman said last week in the wake of a record fine handed out by Ofgem, the regulator, to E.On, that trust in the industry was at an all-time low.

"This fine will only serve to further increase consumers' cynicism towards energy suppliers," he said.

"Our research shows that almost three quarters of consumers would now switch to a small supplier - up from 56% last year - which is clear evidence of the dwindling loyalty amongst 'big six' customers."

Mr Miliband's pledge to freeze prices could also spur an acceleration in switching ahead of next year's election as the major utilities compete to win customers.

Last year's takeover of uSwitch valued the business at a fraction of the £210m for which it was sold by its founder, Lord Milford Haven, in 2006.

Under the deal, Forward Internet Group, which took control of the site in 2009, retained a minority stake.

USwitch operates in a fiercely competitive market, and in recent years has seen itself out-muscled in terms of its advertising spending by larger rivals such as Comparethemarket, Go Compare and Moneysupermarket.com.

Lord Milford Haven's windfall from the sale of the site in 2006 resulted in a substantial loss for the buyer, the US media group EW Scripps.

It sold the business to Forward for less than £10m and took a big writedown on the value of uSwitch because of slower-than-expected consumer switching trends.

USwitch works with thousands of direct and affiliate partners, providing their websites with branded comparison tools for a range of home services. Its calculators also appear on many other websites.

A source close to LDC said no decision had been taken about whether to pursue a flotation, but if it does choose to press ahead, it would represent one of the fastest exits from a UK company by a private equity firm.

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