Water group turns down takeover bid

British water and sewerage group Pennon has rejected a takeover approach from multi-millionaire City financier Guy Hands, it announced today.

Exeter-based Pennon said the approach by Mr Hands’ investment vehicle Terra Firma Capital Partners “failed to recognise” the group’s strategic value.

It is believed that the conditional offer put in by Terra Firma could be as high as £1bn (€1.5bn).

Shares rose more than 5% amid speculation in the City that the group may attract a higher offer.

Pennon, which has a market value of around £880m (€1.3bn), supplies water to 1.5 million people in Devon, Cornwall, Dorset and Somerset as South West Water.

Its waste business, Viridor, operates 21 regional landfill sites, as well as recycling facilities and more than 70 waste-processing sites around the UK.

Pennon said: “The board unanimously decided that the approach failed to recognise the strategic value of Pennon, its track record and the future prospects of Pennon’s two core businesses.”

It said South West Water had “consistently outperformed” its regulatory contract while Viridor continued to offer significant opportunities for earnings growth.

Pennon also announced today that it was in talks with support services group Shanks about the possible purchase of Shanks’ UK landfill and landfill gas assets.

Both parties said the discussions were continuing and were at an advanced stage, although Shanks added there was no certainty the talks would lead to a sale.

Shanks, based in Coatsbridge, Lanarkshire, said that, during the course of the discussions, Terra Firma had approached it with a view to acquiring the landfill assets and that an initial offer was rejected.

After removing a number of conditions relating to the offer, Terra Firma made another approach, leading Shanks to say a further announcement would be made when appropriate.

In November, Pennon reported a 4.4% rise in profits at South West Water to £61.1m (€89.8m), while profits at Viridor rose by 26% to £11.1m (€16.3m).

According to the Sunday Times Rich List, Guy and his wife Julia Hands, who met at Oxford University where they were friends with William Hague, have a personal fortune of £175m (€257.3m).