Pennon to sell Viridor to KKR in $4.2bn deal

BY Fraser Tennant

In a deal valued at $4.2bn, water utility and waste management company Pennon Group Plc has agreed to sell its recycling and residual waste business Viridor to investment firm Planets UK Bidco.

Pennon has stated that the sale of Viridor will be done on a cash-free, debt-free basis. There is also the potential for additional consideration of up to £200m contingent on future events and outcomes.

The Pennon board – which unanimously agreed the transaction – intends to use the deal’s £3.7bn net cash proceeds to reduce its borrowings and make a return to shareholders, while retaining some funds to pursue operational excellence and growth within the UK water industry.

Planets UK Bidco is a new company established by funds advised by global investment firm Kohlberg Kravis Roberts (KKR), a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners that manage hedge funds.

“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 £4.2bn,” said Chris Loughlin, chief executive of Pennon. “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.”

A company at the forefront of the resource sector in the UK, Viridor transforms waste into energy, high-quality recyclates and raw materials. It provides services to around 150 local authorities and major corporate clients as well as around 32,000 customers across the UK.

Expected to complete in summer 2020, the transaction is conditional on approval from Pennon shareholders, merger control clearance from the European Commission and certain other conditions.

Mr Loughlin concluded: “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."

News: British utility Pennon to sell waste management unit for $5 billion, including debt

Costco acquires Innovel from Transformco for $1bn

BY Fraser Tennant

In a $1bn deal which significantly bolsters its distribution, logistics and delivery capabilities, US multinational Costco has acquired third-party delivery and logistics provider Innovel Solutions from  integrated retailer Transform Holdco (TFCO) LLC, the operator of Sears and Kmart stores.

Under the terms of the acquisition agreement, Costco will provide TFCO warehousing, delivery and installation services to Sears and Kmart members on a long-term commercial arrangement. Costco will also retain over 1500 Innovel employees on a go-forward basis.

A provider of warehousing, transportation, installation and home delivery services to retail, manufacturing and commercial clients, Innovel’s network covers nearly 90 percent of the US and Puerto Rico. The company also regularly ranks in the top quartile of customer satisfaction scores. Costco has been a customer of Innovel since 2015.

As part of its acquisition of Innovel, Costco will enter into a long-term commercial agreement in which it will leverage TFCO’s Service Live platform to source technicians for complex installations across the country.

“We have had a great relationship with Innovel and share a philosophy of taking care of our members,” said Craig Jelinek, chief executive of Costco. “We believe the acquisition will allow us to grow our e-commerce sales of big and bulky items at a faster rate.”

Costco’s acquisition of Innovel comes as other large retailers, such as Walmart, Amazon, Target, The Kroger Cos., Albertsons Cos., Ahold Delhaize USA and Dollar General, boost their distribution, logistics and delivery capabilities to meet demand for fast-growing product categories and adapt to an emerging omnichannel business model. These efforts include the construction of new distribution centres, automated facilities to fulfill online orders and dedicated space in stores for e-commerce orders.

For TFCO, Costco’s acquisition of Innovel allows it to focus on its core assets and capabilities to deliver service excellence for its members and customers. TFCO believes this programme will give it the best chance to grow value and to maintain a meaningful retail presence in the US to support the expansion of its core businesses.

News: Costco buys logistics firm Innovel for $1 billion

Full time for Modell’s

BY Richard Summerfield

Modell’s Sporting Goods has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of New Jersey.

The company, which was founded in 1889, operated over 140 stores across several north-eastern and mid-Atlantic US states and had 3623 employees at the time of the filing.

Modell’s had been in a state of financial distress for some time. In February, the company’s chief executive, Mitchell Modell, announced he was seeking an investor to take a minority stake in the business, calling it “crowdsourcing at the highest level”. However, these efforts were unsuccessful.

In a statement announcing the filing, Modell’s explained it was engaged in discussions with its financial creditors and had been exploring a recapitalisation of the business through a potential sale of some or all of its assets or an equity investment. The company will continue to pursue these discussions, it noted in a statement, though it has started to liquidate its remaining stores, having liquidated 19 stores prior to the filing.

“Over the past year, we evaluated several options to restructure our business to allow us to maintain our current operations. While we achieved some success, in partnership with our landlords and vendors, it was not enough to avoid a bankruptcy filing amid an extremely challenging environment for retailers,” said Mr Modell. “We are extremely appreciative of the support that our lenders (JP Morgan Chase and Wells Fargo), vendors and landlords provided during this difficult period, engaging in extensive renegotiation efforts and allowing us to pursue every possible avenue to preserve the jobs of our loyal associates. I want to thank each and every one of our associates for their support over the years and our customers for their historic support of Modell’s.

“This is certainly not the outcome I wanted, and it is one of the most difficult days of my life,” he continued. “But I believe liquidation provides the greatest recovery for our creditors. We have partnered with Tiger Capital Group to liquidate the remaining stores beginning Friday morning, March 13. The return from the liquidation of the first 19 stores managed by Tiger has been beyond spectacular, and we are confident this performance will continue across the remaining stores, maximizing return for our creditors.”

News: Modell’s Sporting Goods Voluntarily Files for Chapter 11 Bankruptcy Protection

Veritas to acquire DXC unit for $5bn

BY Richard Summerfield

DXC Technology announced it has agreed to sell its state and local health and human services business to private equity firm Veritas Capital for $5bn in cash. The deal is expected to close in December, subject to customary closing conditions and the receipt of third-party consent and regulatory approvals. The deal is not subject to any financing condition or shareholder approval.

The deal is the outcome of a process announced by DXC in November 2019 to explore strategic alternatives for three of its non-core assets. The company will use proceeds from the sale to pay down existing debt, which is consistent with DXC’s policy of maintaining a strong balance sheet and an investment grade credit profile.

“I’m pleased that we continue to execute the plan that we outlined in November, especially in this volatile environment,” said Mike Salvino, chief executive of DXC, in a statement announcing the deal. “The transaction is an important first step in our business and focusing on the enterprise technology stack. The transaction progressed much faster than we originally anticipated, but we are absolutely delighted to partner with Veritas Capital, the leading investor in health care and government sector.”

“DXC’s US State and Local Health and Human Services business is a leading player in a highly complex market that continues to benefit from technological innovation,” said Ramzi Musallam, chief executive and managing partner of Veritas. “The intersection of government, technology and healthcare is a key focus area for Veritas. By combining the business’ talented employees with our extensive industry experience, we plan to build on the business’ unwavering commitment to its customers and leadership in mission critical healthcare technology to drive continued improvement in the quality of healthcare for citizens nationwide. We look forward to welcoming the business and its employees into the Veritas portfolio.”

News: DXC Technology to sell healthcare unit for $5 billion to Veritas Capital

Tesco sells Malaysian and Thai assets to Charoen for $10.6bn

BY Fraser Tennant

In a deal which will see the return of $6.6bn to its shareholders, supermarket giant Tesco is to sell its businesses in Thailand and Malaysia to Bangkok-based conglomerate Charoen Pokphand Group for $10.6bn, including debt.

The sale of its Malaysian and Thai assets will simplify the Tesco Group, enabling a stronger focus on its retail businesses in the UK, Ireland and Central Europe. The transaction also generates substantial  value for Tesco’s shareholders and allows the Group to further de-risk by reducing indebtedness through a pension contribution of £2.5bn.

Over the last four years Tesco’s performance has significantly improved – particularly within the UK, its largest and most important market – but also across the wider Tesco Group. It is from this strengthened position that the Tesco board decided to respond to the expressions of interest it received for its businesses in Thailand and Malaysia and unanimously concluded that the offer by Charoen should be recommended to shareholders.

Operating across many industries ranging from industrial to service sectors, which are categorised into eight business lines covering 13 business groups, Charoen currently has investments in 21 countries and economies.

"Following inbound interest and a detailed strategic review of all options, we are announcing the proposed sale of Tesco Thailand and Tesco Malaysia,” said Dave Lewis, chief executive of Tesco. “This sale releases material value and allows us to further simplify and focus the business, as well as to return significant value to shareholders. I would like to thank all of our Tesco Thailand and Tesco Malaysia colleagues for their dedication, professionalism and service to our customers, which has resulted in the creation of such a strong business.”

Subject to customary regulatory approvals in Thailand and Malaysia, the transaction is expected to be completed during the second half of 2020.

Mr Lewis concluded: “I am confident that the agreement we have reached with Charoen presents an exciting opportunity for their continued success."

News: Tesco plans $6.6 bln shareholder return from Thai, Malaysia sale