BY Fraser Tennant
In a deal valued at $4.2bn, water utility and waste management company Pennon Group Plc has agreed to sell its recycling and residual waste business Viridor to investment firm Planets UK Bidco.
Pennon has stated that the sale of Viridor will be done on a cash-free, debt-free basis. There is also the potential for additional consideration of up to £200m contingent on future events and outcomes.
The Pennon board – which unanimously agreed the transaction – intends to use the deal’s £3.7bn net cash proceeds to reduce its borrowings and make a return to shareholders, while retaining some funds to pursue operational excellence and growth within the UK water industry.
Planets UK Bidco is a new company established by funds advised by global investment firm Kohlberg Kravis Roberts (KKR), a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners that manage hedge funds.
“Following a detailed review of the Group's strategic options, we are pleased to announce the proposed sale of Viridor for an enterprise value of £4.2bn,” said Chris Loughlin, chief executive of Pennon. “The transaction is great news for shareholders as it recognises the strategic value that Pennon has developed and nurtured in Viridor over many years and accelerates the realisation of that value for shareholders.”
A company at the forefront of the resource sector in the UK, Viridor transforms waste into energy, high-quality recyclates and raw materials. It provides services to around 150 local authorities and major corporate clients as well as around 32,000 customers across the UK.
Expected to complete in summer 2020, the transaction is conditional on approval from Pennon shareholders, merger control clearance from the European Commission and certain other conditions.
Mr Loughlin concluded: “On completion of the transaction, Pennon will continue to focus on its sector-leading water and wastewater businesses and will consider further growth opportunities that create value for customers, employees and shareholders."
News: British utility Pennon to sell waste management unit for $5 billion, including debt