In the largest deal since the coronavirus began crashing markets and economies, KKR (NYSE: KKR) is buying UK recycling company Viridor.

It will acquire the firm from Pennon Group for £4.2 billion in cash. Net proceeds to Pennon Group will be 3.7 billion pounds, with additional consideration of 200 million pounds contingent on future events. The Pennon Board of Directors said it intends to use the net cash proceeds to reduce Pennon’s company borrowings and make a return to shareholders.

Viridor Deal Puts Dry Powder to Work

Viridor works with more than 150 Local Authorities in advanced recycling, composting, Household Waste Recycling Centre management, Energy from Waste treatment, waste transfer operations and landfill disposal services. The company also provides recycling and waste collection, treatment and disposal services to thousands of private sector customers across the United Kingdom.

“Following a detailed review of the Group’s strategic options, we are pleased to announce the proposed sale of Viridor for an Enterprise Value of £4.2 billion,” said Chris Loughlin, Pennon CEO. “The transaction is great news for shareholders as it recognizes the strategic value that Pennon has developed and nurtured in Viridor over many years and accelerates the realization of that value for shareholders. On completion of the transaction, Pennon will continue to focus on its sector-leading water and wastewater businesses and will consider further growth opportunities that create value for customers, employees, and shareholders.”

While a little expensive at an EV/EBITDA multiple of about 18.5, waste companies are great buys during a tumultuous market. Waste companies generate reliable cash flows and the demand to process waste will never go away. Given the amount of cash KKR has to deploy as prices fall, I expect to see more deal announcements as the coronavirus continues to disrupt markets.

By: Tim Melvin

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