Devon-based utilities giant Pennon has entered into an agreement to sell Viridor, its recycling and waste business, for a huge sum of more than £4 billion.
Taking the business on is Planets UK Bidco Limited (Bidco), a newly formed private limited company established by funds advised by American global investment firm Kohlberg Kravis Roberts & Co. L.P (KKR).
The sale of Viridor for £4.2 billion is on a cash-free, debt-free basis, with Pennon intending to use the net cash proceeds to reduce Pennon’s company borrowings and make a return to shareholders, whilst retaining some funds for ‘future opportunities’.
Commenting on the transaction, Chris Loughlin, Pennon Chief Executive said: “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 £4.2 billion.
“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.
“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.”
The transaction is conditional on approval from Pennon shareholders, merger control clearance from the European Commission and certain other conditions, and is expected to complete in summer 2020.
The sale was unanimously agreed by the Pennon Board to be in the best interests of shareholders.
Pennon, which also owns South West Water, has said it will continue to pursue operational excellence and growth within the UK water industry.
Tara Davies, partner and EMEA head of infrastructure at KKR, said “Viridor is a key part of the UK’s environmental infrastructure. We expect the company to play a critical role in the years ahead in helping the UK meet sustainability objectives, by reducing waste to landfill, further developing its energy-from-waste capability and building recycling capacity, particularly in plastics.
"Supporting Viridor in these aims fits with KKR’s focus on making long-term investments in companies which are addressing major sustainability challenges, and investing in critical UK infrastructure.”
