Pennon’s $5 Billion Viridor Sale Draws Veolia, EQT Interest

(Bloomberg) -- Pennon Group Plc’s sale of its waste-management arm is attracting initial interest from suitors including Nordic buyout firm EQT AB, KKR & Co. and Macquarie Group Ltd.’s infrastructure arm, people familiar with the matter said.

The U.K. company’s Viridor Ltd. unit could fetch as much as $5 billion, according to the people, who asked not to be identified because the information is private. Pennon has also been gauging interest from potential bidders including U.K.-based Dalmore Capital, French water company Suez, Equitix and Veolia Environnement SA, the people said.

Pennon has kicked off a sale process and started sending information memoranda with details on the business to prospective bidders last week, the people said. It expects to get first-round offers in the next few weeks, according to the people.

Some Viridor competitors may be reluctant to commit a large amount to a deal due to antitrust concerns, and there’s no certainty the prospective bidders will proceed with firm offers, the people said.

Shares of Pennon jumped as much as 6.5% in London trading Tuesday, hitting a record high. They were up 3.8% at 3:33 p.m., giving the company a market value of about 4.9 billion pounds ($6.3 billion).

Water Utility

Pennon, which also owns the South West Water utility, said in September that it was conducting a strategic review to examine its growth options and capital allocation policy. The Viridor division works with more than 150 local authorities and major corporate clients and has more than 32,000 customers across the U.K., according to its website.

Barclays Plc and Morgan Stanley are advising Pennon on the sale, the people said. Representatives for Pennon, Dalmore, EQT, Equitix, KKR, Macquarie, Morgan Stanley, Suez and Veolia declined to comment. A representative for Barclays didn’t immediately respond to requests for comment.

At $5 billion, a sale of Viridor could become the biggest carveout of a division from a publicly traded U.K. firm since August 2018, when Whitbread Plc agreed to sell its Costa Ltd. cafe chain to Coca-Cola Co., according to data compiled by Bloomberg. British companies have been looking at selling or spinning off non-core operations as they face pressure to boost their stock prices.

Smiths Group Plc has invited final bids for its $3 billion medical unit, people familiar with the matter said this month. Melrose Industries Plc is seeking a buyer for the bulk of its Nortek division in a potential $3 billion deal, Bloomberg News has reported. Engineering firm Senior Plc said last year it’s exploring the sale of an aerostructures business that supplies components to Airbus SE and Boeing Co.

--With assistance from Francois de Beaupuy.

To contact the reporters on this story: Dinesh Nair in London at dnair5@bloomberg.net;Myriam Balezou in London at mbalezou@bloomberg.net

To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, Amy Thomson

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