Asian tycoon lines up £2bn utility bid
ONE of the world’s richest men is mulling a bid for Northumbrian Water that could value it at more than £2bn.
Li Ka-shing, the wealthiest man in east Asia, triggered an eight per cent surge in Northumbrian shares when Cheung Kong Infrastructure (CKI), his investment vehicle, said it was considering making an offer for the firm.
The move could open the flood-gates for water sector takeover activity, which has gone through a dry spell since the recession. Deutsche Bank is advising Northumbrian.
The utility has seen its shares steadily climb since speculation began last week, rising 12 per cent since Thursday to hit 414p. Analysts say a bid could be as high as 430p a share, valuing the firm at around £2.6bn.
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.
Water firms are particularly appealing to long-term investors such as pension funds thanks to their guaranteed income stream.
Ka-shing, who is also chairman of telecoms giant Hutchison Whampoa, has been linked with a move for a UK water company for some time. The property tycoon, who has a fortune estimated at more than £16bn, making him the eleventh richest man in the world, paid £5.8bn for EDF Energy’s UK power networks business last year. He has also been active in utilities and infrastructure in Canada and Australia.
Earlier this year he missed out on buying German utility E.ON’s UK power networks. CKI was the odds-on favourite to take control of the asset but was pipped to the post by US power firm PPL.
Northumbrian, which supplies water to the north east and parts of the south east through its vast Kielder reservoir, released a statement last night saying it has not received an approach.
It said: “The board confirms that it has not received any proposal which could result in an offer or possible offer for the company.”
Other listed water companies rode the wave created by the speculation, with United Utilities climbing 3.3 per cent, Severn Trent rising two per cent and Pennon Group jumping 2.3 per cent.
The potential bid is already drawing comparisons to Australian Macquarie’s acquisition of Thames Water for an eye-watering £8bn in 2006.