Pennon sells waste arm to private equity investor for £4.2bn

Pennon Group has agreed to sell its waste management arm Viridor to Planets UK Bidco – a newly formed company established by global private equity investor Kohlberg Kravis Roberts for £4.2 bn.

The cash- and debt- free deal will provide net cash to Pennon are anticipated to be about £3.7bn which Pennon said will be earmarked to “reduce Pennon’s company borrowings and make a return to shareholders, whilst retaining some funds for future opportunities.”

Pennon said its dividend policy of 4% growth above retail price index will remain unchanged for this financial year (2019/20) and intends to announce a new policy for the 2020-25 period at its full-year results in June.

The deal – which is conditional on approval from Pennon shareholders, European Commission merger clearance and other conditions – values the enterprise at 18.5 times its earnings before interest, tax, depreciation and amortisation. Pennon said it expected the transaction to complete in summer 2020.