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

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

  • Pennon sells its waste business Viridor to a US-based investment firm KKR for £4.2 billion
  • “Viridor is a key part of the UK’s environmental infrastructure,” KKR notes
  • Pennon will receive around £3.7 billion in cash
  • Shares of Pennon have gained around 20% in the last 3 days

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 is a key part of the UK’s environmental infrastructure,” said Tara Davies, partner and EMEA head of infrastructure at KKR.

“We expect the company to play a critical role in the years ahead in helping the UK meet sustainability objectives, by reducing waste to landfill, further developing its energy-from-waste capability and building recycling capacity, particularly in plastics.”

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.

“The transaction is great news for shareholders as it recognises the strategic value that Pennon has developed and nurtured in Viridor over many years and accelerates the realisation of that value for shareholders,” said Pennon chief executive Chris Loughlin.

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.

Pennon stock weekly chart (TradingView)

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.

By Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site. Click here for more information.