Pennon Group, the owner of South West Water, has announced the acquisition of SES Water for £89 million.
Pennon, which also operates Bristol and Bournemouth Water, will buy the holding company of SES, as well as other ancillary businesses, from Sumitomo Corporation and Osaka Gas, in a deal that values SES at £380 million. This value is based on net debt of £291 million as of March 2023 and equates to a premium to SES’ regulatory of c6% after some adjustments.
The deal will be subject to regulatory approval.
SES, a water-only company serving c750,000 customers in south east England, was put up for sale almost a year ago.
Pennon is funding the acquisition through existing cash but also launched a share placing of £180 million on Wednesday (10 January) morning. It has pledged to provide an equity injection to “enhance SES Water’s financial resilience”, bringing the company’s gearing from 88% to within Pennon’s group-wide range of 55% to 65%.
Pennon said the deal allows other opportunities for the companies to share best practice, adding that SES is “a well-run operation with top performance for water quality, leakage and supply interruptions” and that this know-how could be rolled out across the rest of its operations.
Susan Davy, group chief executive of Pennon Group, said: “SES Water is a fantastic growth opportunity for Pennon, demonstrating our commitment to the UK water industry. As part of the Pennon Group, we will enhance SES Water’s financial resilience and better position the business to serve its customers and all stakeholders, as has proven to be the case with our acquisitions of Bournemouth Water and Bristol Water.
“We are able to invest in SES Water’s resources infrastructure, environment and people thanks to our strong financial performance and long-term UK shareholder base, delivering a seamless transition for SES Water’s customers while also providing an evenmore robust and reliable service to customers.
“Having submitted our biggest investment plan of £2.8 billion from 2025-30 to date, a plan which will create 2,000 new jobs and improve long-term water resilience, the acquisition of SES Water comes at a time of great promise for our business, and I am looking forward to this next exciting chapter in our development.”