Energy Challenger Ovo Close To £200m Deal

One of the biggest challengers to Britain's major energy companies is closing in on a deal that will value it at more than £200m.

Sky News has learnt that Ovo Energy is in advanced talks about the sale of a large minority stake to Mayfair Equity Partners, a new private equity firm.

The deal could be signed as early as Friday, with an announcement likely in the coming days, according to sources close to the deal.

The transaction will involve Mayfair acquiring a small part of the Ovo shareholding of Stephen Fitzpatrick, the energy company's founder.

It is understood to be designed to provide Ovo with funds to accelerate its growth at a time when the energy market is under intense political and regulatory scrutiny.

The deal will be the first institutional money taken by Ovo since it launched in 2009.

The Competition and Markets Authority (CMA) is weeks away from publishing its provisional findings after a year-long probe into the sector, which is dominated by six major gas and electricity suppliers.

In its submission to the CMA inquiry last year, Ovo said it wanted "substantive changes" to the existing regulatory framework.

Ovo has set a target of reaching 1m customers by 2017 and wants to establish itself "as the most trusted energy company in the UK".

The big six energy companies (British Gas, EDF Energy, EOn (Taiwan OTC: 3411.TWO - news) , Npower, Scottish Power and SSE (LSE: SSE.L - news) ) have all cut their prices in recent months following pressure from ministers.

A number of other challengers, including First Utility, have also established strong footholds in the sector.

Mr Fitzpatrick has also been prominent in recent months after acquiring a controlling stake in the Manor Formula One team, which saw both of its drivers finishing last weekend's Chinese Grand Prix.

The investment in Ovo will also be significant for Mayfair, marking the maiden deal for the firm, whose founders built a strong track record at LDC, the private equity arm of Lloyds Banking Group.

Daniel Sasaki, one of the founders of Mayfair, was responsible for LDC's investment in Fever Tree, the fast-growing premium mixers brand which floated on the stock exchange last year.

Mayfair's principals also oversaw investments in companies including uSwitch, the price comparison website for household utilities, and Avelo, a financial services software business that drives the distribution of retail financial products in the UK.

The private equity group is said to be making good progress towards its fundraising target of £350m, and is said to be in discussions about a number of other transactions in the consumer goods and technology, media and telecoms sectors.

Ovo and Mayfair both declined to comment on Friday.