Utilities giant Pennon Group Plc has begun the fourth phase of a £400m share buy-back programme as it awaits a competition watchdog decision about its takeover of Bristol Water.
The Exeter-headquartered business, which this year was knocked off its perch as the largest firm in the region by turnover in the the Western Morning News Annual Business Guide, initiated the first phase of a share repurchase scheme, of up to £400m, in July 2021.
The first three phases of the Pennon’s on-market share buy-back programme spent about £150m in total during the following six months as the company, parent of South West Water, strove to repurchase equity in a bid to reduce share capital.
Now Pennon is entering a fourth phase of the programme, which lasts until March 18, 2022, and has entered into a non-discretionary agreement with Morgan Stanley & Co International Plc.
This will enable the bank to purchase Pennon’s ordinary shares at 61.05p up to a total spend of no more than £50m and simultaneously sell them to the company.
Pennon said Morgan Stanley will make its trading decisions independently and without any influence from the company. All shares repurchased will be cancelled.
In a statement to investors, Pennon said: “Pennon is announcing today that it is initiating the fourth phase of the programme and has entered into a non-discretionary agreement with Morgan Stanley & Co International Plc to enable Morgan Stanley, acting as principal, to purchase ordinary shares of 61.05p each in the share capital of Pennon for an aggregate purchase price of no greater than £50m and the simultaneous on-sale of such shares by Morgan Stanley to Pennon.
“This agreement commences on January 28, 2022, and share purchase activity pursuant to the agreement is expected to end no later than March 18, 2022. Morgan Stanley will make trading decisions in relation to Pennon shares purchased under the programme independently of, and uninfluenced by, Pennon. All shares repurchased will be cancelled.”
The maximum number of shares that can be repurchased under the entire buy-back programme is 42,183,689, which is the maximum allowed by shareholders at Pennon's annual meeting in July 2021.
In June 2021, Pennon announced its plan to return capital to shareholders by way of a £1.5bn special dividend, paid on July 16, and the potential £400m on-market share buy-back programme of its ordinary shares.
Share buy-back schemes reduce the number of shares and inflate dividends. They can also hike share prices and show to investors a firm has plenty of cash.
Phase four of the programme comes just a few weeks after The Competition and Markets Authority (CMA) launched a consultation on plans submitted by Pennon to address concerns about its £425m takeover of Bristol Water.
The CMA said in December 2021 it would launch an in-depth investigation into the deal unless Pennon put forward suitable proposals showing how it would maintain separate price controls for the Bristol Water region within a merged water business. Pennon has submitted these plans and said it is confident a full Phase 2 review can be avoided and the deal will be approved. It said the consultation, which ends on March 7, is standard procedure and it considers there are reasonable grounds the undertakings offered by the company might be accepted by the CMA under the Water Industry Act 1991.
In January 2022, the W estern Morning News placed Pennon at number four in its list of the largest companies in the South West by virtue of turnover. However the company had slid from first place in 2021, but nevertheless has a turnover of £624,099,968 and employs 1,987 people. Pennon Group reported a £90.4m pre-tax profit for the six months to November 2021 - a 4.3%% hike on the same period in Covid-hit 2020.
