Wed, 31 Mar 2021 | BUSINESS NEWS
South West Water owner Pennon Group says it is considering utilising the proceeds from the sale of recycling business Viridor to target acquisition opportunities. In a trading statement, Pennon said it was reviewing reinvesting the Viridor proceeds in potential growth opportunities in the UK's water sector.
If an acquisition is not made, the company said it would make a “substantial return of capital to shareholders.” Pennon said it would seek to clarify this by the time of its full-year results on June 3.
The sale of Viridor to private equity firm KKR last year generated £3.7 billion in net cash proceeds for Pennon. The group used £1 billion to de-gear, leaving it with a “sustainable” £200 million in gross debt. As of today, the company says it has expected cash and facilities “well in excess of £3 billion.”
Regarding its plans, the company said: “Pennon believes there is significant value potential from the reinvestment of the Viridor sale proceeds in the UK water sector and continues to narrow down its review of potential growth opportunities.”
“In the event a major value accretive investment opportunity is not available, Pennon expects to make a substantial return of capital to shareholders.”
Reports have indicated that a likely acquisition target is Southern Water, which Pennon was reportedly mulling a bid for in late 2020. Southern Water has struggled in recent years with high debts and regulatory investigations, with the company being hit with a record £126 million fine from water regulator Ofwat in 2019.
Regarding Pennon’s potential acquisition plans, Steve Clayton of Hargreaves Lansdown commented: “Today's statement is reassuring but necessarily fails to provide full clarity on how Pennon will go about reinvesting the Viridor proceeds. But it looks as though whilst Pennon have not signed a deal yet, they may be reaching for the pen.”
“The group say that by their full-year results on June 3 they will either have announced a deal to acquire another UK water company, and Southern Water is the name most often linked here, or they will make a substantial return of capital to their investors.”
“In an uncertain world, Pennon looks attractive. Either the most effective management team in the sector will get a major new set of assets to work with, or there will be an upfront cash return. Either way, Pennon looks set to have a busy summer ahead.”
Find businesses for sale here.
If you are looking for an exit, we can help!
The company was originally founded in 2018 to provide commercial contract cleaning and specialist cleaning services in the Essex, London and surrounding area. By providing an outstanding quality of service and a broad range of specialist services...
LEASEHOLD
Provides a wide range of security services for residential & commercial premises including intruder alarm systems fire alarm systems access control monitored CCTV intercom systems guards key holding alarm response & dog handling. Offers services 24/7...
Buys clean and contaminated, and new production aluminium cans, as well as aluminium foil bottle tops, from clients across the UK and utilises a bank of specialist machinery to process and recycle the aluminium ready for sale. Processes volumes of be...
LEASEHOLD
19
|
May
|
Knights continues acquisition-lead growth strategy with £11.5m deal for law firm | BUSINESS SALE
Legal services company Knights has acquired Portsmouth-headq...
18
|
May
|
Insolvencies forecast to surge 37 per cent in 2022 as inflation hits 40-year high | BUSINESS NEWS
Businesses in the UK look set to come under continuing press...
18
|
May
|
Cotswolds pub in prime tourist town comes to market for £1.3m | BUSINESS SALE
The Mousetrap Inn in the popular Cotswolds tourist town of B...
Sign up to receive our acquisition alert emails to get your FREE guide
21
|
May
|
Biffa agrees £126m deal for Viridor assets | BUSINESS SALE
Biffa has agreed a deal to acquire the collections business ...
Business Sale Report is your complete solution to finding great acquisition opportunities.
Join today to receive:
All this and much more, including the latest M&A news and exclusive resources