Pennon Stock Price Rallies 20% On £4.2bn Viridor Deal

Despite a stock market bloodbath in the recent weeks, shares of the utility giant Pennon (LON:PNN) have gained around 20% in the last 3 days, after the company announced it sold its waste business Viridor to private equity firm KKR in a £4.2 billion deal.

Pennon, one of the largest environmental infrastructure groups in the country, agreed to a deal after a US-based fund KKR made a second bid for Viridor in January. The first bid, made last year, was knocked down.

It was announced that financial advisers from Morgan Stanley and Barclays were appointed to facilitate the sale. Pennon expects to receive around £3.7bn in cash after taking into account debt and transaction costs.

Viridor, which produces energy by burning waste, has been on the radar of many companies and been regarded as one of the hottest properties in the recent year. The company has 150 businesses and councils, and over 32,000 customers in its books.

Pennon may receive up to £200m in additional funds, dependent on future events and outcomes.

Technical analysis: Stock holding really well

Shares of Pennon trade around 20% higher compared to the Monday’s low on the Viridor news. The price action came close to the record highs this morning, which is extremely impressive given the state of the stock market at the moment.

As seen in the weekly chart above, the price hit a record high just a month ago. The rally stopped around the £1.2 mark, which is a 161.8% Fibonacci extension. The price action then retreated lower all the way to 2016 and 2017 highs, got more support and bounced back.

Thus, the support remains at £0.95 for the coming days and weeks, while the record high will continue to act as a major target for the bulls.

Summary

Shares of major utility firm Pennon have rallied around 20% in the last 3 days after the company announced it sold its hot waste management business Viridor to a US private fund KKR in a deal estimated to be worth £4.2 billion.