BRISTOL WATER acquired by PENNON

Pennon Group acquired Bristol Water Holdings UK and its subsidiaries, including Bristol Water, from infrastructure funds advised by iCON Infrastructure, which held the majority, and from ITOCHU Corporation, in a transaction signed and completed on 3 June 2021. It took the entire share capital of the holding company, at an implied enterprise value of £814m including assumed debt, an EV/revenue multiple of 4x–10x on revenue of £100–200M. The price represented a premium to the regulated company’s regulatory capital value, and Pennon funded it entirely from its own cash resources. Those resources came from the sale of Viridor to KKR, completed in July 2020, whose proceeds the group had been reviewing against a possible return of capital to shareholders. Alongside the acquisition, Pennon proposed a special dividend combined with a share consolidation and an on-market buy-back programme. The two water businesses serve neighbouring areas, and Pennon expected to extend South West Water’s wholesale capabilities over the enlarged territory and to apply each company’s practices to the other. The purchase was expected to add to earnings and to increase the group’s regulatory capital value. After completion, the transaction remained subject to review by the Competition and Markets Authority, with input from the water regulator. Barclays and Morgan Stanley acted as joint financial advisers and corporate brokers to Pennon.