NORTHUMBRIAN Water surged 5.1 per cent yesterday after it received a £2.4bn provisional offer from Hong Kong billionaire Li Ka-shing.
Northumbrian will now open its books to Ka-shing’s Cheung Kong Infrastructure (CKI).
The 465p a share bid would give a 21 per cent premium to Northumbrian’s share price before reports of a takeover surfaced last month. Shareholders will also receive a net final dividend of 9.57p. Analysts had expected CKI to pay 450-500p.
The utility released a statement to the market saying the approach does not guarantee a firm offer will be made.
The UK has proved a popular investment destination for octogenarian Ka-shing, Hong Kong’s richest man, who has bought into regulated utility assets in the past.
CKI has already invested in two unlisted British water companies – it owns Cambridge Water and has a 4.75 per cent stake in Southern Water.
However, it has agreed to sell Cambridge Water prior to announcing a firm bid offer for Northumbrian.
Cambridge Water has a regulatory capital value (RCV) of £57m, while Northumbrian Water has a group RCV of £3.6bn.
Key to any deal will be Canadian Ontario Teachers’ Pension Board, which owns 27 per cent of Northumbrian. Analysts believe it will seek to maintain an interest in the company if a deal goes through.
Fellow listed water companies United Utilities, Severn Trent and Pennon Group all fell slightly yesterday.
ADVISERS: DEUTSCHE BANK
ADVISING Northumbrian as it negotiates the multi-billion pound offer from the richest man in East Asia and eleventh richest man in the world, is Deutsche Bank.
Heading up the advisory team is Alan Brown, global co-head of the bank’s natural resources group. Brown was promoted to head of the bank’s natural resources division in Europe, Africa and the Middle East in 2007.
He is working alongside highly-rated M&A bankers Omar Faruqui and Martyn Nicholas.
Deutsche is also acting as corporate broker on the deal, with Martin Pengelley leading the team. In the past Pengelley has acted as financial adviser to Whitbread and Costa and corporate broker to Whitbread as the firms made an offer for Coffeeheaven International.
He has also acted as corporate broker for Premier Oil in 2008 and Taylor Nelson Sofres (TNS), also in 2008, during its merger with GfK.