South West Water’s parent company Pennon Group has agreed to sell its waste and recycling subsidiary Viridor to KKR in a deal valuing the company at £4.2 billion.
The US private equity firm, which was rumoured to have put in a bid last year has set up a new company, Planets UK Bidco, to acquire Viridor.
Net cash proceeds are expected to be around £3.7 billion at completion. There is also the potential for additional consideration of up to £200 million contingent on future outcomes.
The Pennon board said it will use the funds to reduce the company’s borrowings and make a return to shareholders, whilst retaining some funds for future opportunities
Chris Loughlin, Pennon chief executive, said: “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 valuation of £4.2 billion represents an EBITDA multiple of 18.5x.
The sale was unanimously agreed by the Pennon Board but remains subject to shareholder approval.
Last October Loughlin told Utility Week Viridor was performing “exceptionally well” following a phase of major investment to add 11 large energy recovery facilities across the country.