Pennon to reject £1bn Hands bid

Pennon, the Devon-based water and sewage business, will today reject a £1bn bid from the high-profile financier Guy Hands, saying it wants to pursue an independent strategy.

The company is also expected to confirm it is in talks to acquire part of its smaller rival, Shanks, for about £200m.

Mr Hands, who has been named as a possible buyer for a string of water businesses in the past few years, approached Pennon through his investment vehicle Terra Firma within the past month.

However, Pennon's management is unwilling to sell. It wants instead to expand its growing waste processing and recycling business through a series of smaller acquisitions.

Ken Harvey, the chairman of Pennon, has embarked on a round of talks with shareholders to garner their support for this approach. So far, shareholders are thought to have backed Mr Harvey.

Pennon, which supplies water to 1.5 million customers in Devon, Cornwall and parts of Dorset and Somerset under the South West Water brand, has spent considerable time trying to expand its waste business, and in April bought Thames Waste Management for £30.5m. It has already been in sporadic talks with Shanks, the listed waste management group, to buy its British business, which is worth more than £150m.

Mr Hands had retained Citigroup to act for him on the offer for Pennon, which has a market value of £880m. Analysts said any bidder would have to offer a premium to Pennon's closing price on Friday of 703.5p, meaning that the take-out price could be closer to £1bn.

In the past few years Mr Hands has been mooted as a potential buyer of several water companies, including AWG, the owner of Anglian Water.

The financier, who used to work for the Japanese bank Nomura, has made an approach to Pennon because he is particularly interested in its expanding waste business, Viridor. The subsidiary operates 21 regional landfill sites, regional recycling facilities and more than 80 waste-processing sites around the UK.

Viridor could be merged with Waste Recycling Group, Britain's biggest waste-disposal company, which was bought by Terra Firma last year for £531m.

Both Pennon and Terra Firma declined to comment yesterday.

Water companies are currently under strain as they await a decision by the regulator over how much they can increase customer bills over the next five years in order to pay for a huge capital spending programme that could exceed £20bn.

Standard & Poor's, the ratings agency, will issue a report tomorrow warning that unless the companies are given enough funding to pay for the improvements that have to be made to meet European and Government guidelines, the credit quality of the sector will be under threat. The companies could also find it more difficult to cope with any future cash flow shocks.

Mr Hands made his name at Nomura by spotting opportunities for investing in sectors which had been neglected by the City. Chief among them were pub estates, which Mr Hands bought up in droves in the late 1990s.

At its peak, Mr Hands' pub empire consisted of more than 5,500 mainly tenanted and leased houses.

The biggest estate was the Unique Pub Company, which was sold in March 2001 for £2bn to a consortium of private equity groups working with Enterprise Inns.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'