LONDON, UK: Pennon Group plc has acquired 100% of the issued share capital of Bristol Water Holdings UK Limited and its subsidiaries, including Bristol Water plc, for an equity value of £425 million, and an enterprise value of £814 million including assumed debt.
Pennon bought Bristol Water Group from its indirect shareholders: infrastructure funds advised by iCON Infrastructure LLP (80% of the shares); and ITOCHU Corporation (20%).
Pennon is also announcing a return of capital to shareholders, consisting of a Special Dividend of c.£1.5 billion, and a share buy-back programme of up to £0.4 billion.
Commenting on the Acquisition, Susan Davy, Group Chief Executive said: ‘The acquisition of Bristol Water brings great people and a great business to Pennon and I am hugely excited about building a future together. We see attractive opportunities to continue to invest in the Bristol Water business to deliver enhanced resilience and water security to benefit customers in Bristol and beyond. This latest acquisition, building on a strong heritage and history, firmly cements Pennon as one of the leading UK water and waste water companies.
Additionally, we have demonstrated our credentials as a responsible business, reducing debt levels, increasing pension contributions, and further supporting the Green Recovery for the much-needed regeneration of our region.
Pennon is also proposing an on-market share buy-back programme of up to £0.4 billion expected to be conducted through to September 2022, noting that this may be reconsidered if other attractive growth opportunities are identified. We are also pleased to be recognising shareholder support through the return of c.£1.5 billion to shareholders in the form of a special dividend.
Our sector-leading dividend policy, which we have strengthened today, together with the proposed special dividend, recognises the ongoing loyalty of our shareholders, underpinned by the Group’s confidence in our ongoing growth strategy, and building a sustainable future for all.’
Pennon Group has undertaken a highly disciplined strategic review of potential growth options to look to deploy the net proceeds (the Strategic Review). The Strategic Review considered a range of factors including earnings accretion, value creation from the impact on shareholder returns (both income and growth) and the impact on customers and other stakeholders. All opportunities have been benchmarked against a return of capital to shareholders.
The Acquisition marks an important step in that review, with the Board considering the Bristol Water Group to be highly complementary to the Group. The Board believes that the Acquisition presents an attractive opportunity to expand South West Water’s wholesale capabilities, whilst also deploying best practice from both businesses to deliver value for customers, shareholders and broader stakeholders.
The Acquisition will increase the size and scale of the Group to serve a total population of c.3.5 million in our region and will deliver an estimated 16% increase in RCV. It also adds another 500 dedicated employees to the Group, enabling access to a new, wider and diverse talent pool in the South West, with further opportunities to become an employer of choice.
Pennon will fund the cash consideration for the Acquisition from existing cash resources. The Acquisition is not conditional on any acquisition financing and will not involve any deferred consideration. The Acquisition has been irrevocably signed and will complete later today, 3 June 2021 and, following completion, is subject to review by the Competition and Markets Authority (CMA), with input from the Water Services Regulation Authority (Ofwat).
Pennon considers that the Acquisition will create a net benefit for customers and shareholders and expects to receive a decision from the CMA within its usual timescales.
Pennon Group plc
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2 Jun, 4:45 pm GMT+1 · Disclaimer
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