Pennon Buys Sembcorp Bournemouth Water in U.K. Expansion

Pennon Group Plc, the U.K.’s third-largest publicly traded water company, purchased Sembcorp Bournemouth Water Investments Ltd. for 100.3 million pounds ($150 million) to expand in southern England.

To replenish its coffers after buying Bournemouth Water from Singapore-based Sembcorp Industries Ltd., Pennon completed the placement of almost 12.1 million new shares at 830 pence Thursday to raise the entire purchase price. That will increase the utility’s share capital by about 3 percent, Pennon said in a statement.

Exeter-based Pennon already owns South West Water Ltd., which provides water and sewer services to 1.7 million customers in Devon, Cornwall and parts of Dorset and Somerset, and the waste unit Viridor Ltd. The acquisition “makes clear strategic sense,” Pennon Group Director of Finance Susan Davy said by e-mail. “Bournemouth Water is highly complementary to South West Water.”

Bournemouth Water said its business plan for the next five years remains unchanged and that an 11 percent cut in bills this year will still go ahead. The acquisition may lead to further improvements and efficiencies in services and bills, it said. Pennon plans to keep average bill increases below inflation to 2020.

Ofwat, Britain’s water regulator, on Dec. 12 published the rates that utilities can charge customers for the five-year period starting this month. This clarity over the industry’s economics to 2020 is likely to result in a pickup of merger and acquisition activity, Michael McVeigh, director of corporate finance at Ernst & Young Global Ltd., said at the time.

United Utilities Group Plc and Severn Trent Plc are the U.K.’s two biggest publicly trading water utilities. Pennon shares, which have gained 18 percent over the past year, were little changed Thursday in London trading at 839 pence.

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