Thames Water sold for $14.84 billion
2006-10-16

Category Water Utlities M&A Nations Australia U.S.

A group led by Australia's Macquarie Bank Ltd. (MBL.AX) on Monday won a battle to buy Thames Water in a deal that values the UK utility at 8 billion pounds ($14.84 billion), including debt.

Macquarie beat off rival offers from bidders such as Qatar Investment Authority, which had widely been seen as the front-runner to win the auction for Thames -- owned by German utility RWE AG (RWEG.DE).

RWE and Macquarie announced the much-anticipated deal in separate statements from Frankfurt and London respectively.

The German firm said Macquarie Bank, its European Infrastructure Fund and other investors had agreed to buy Thames for 8 billion pounds, including 3.2 billion pounds of net debt.

The sale is part of its strategy to focus on electricity and gas businesses, like its bigger rival E.ON (EONG.DE).

Macquarie said the deal was subject to the approval of the RWE supervisory board, which is due to meet at the weekend.

"Following approval, Macquarie will provide further information relating to the transaction and its ambitions and plans for this important business," the bank said in a statement confirming an earlier Reuters report.

BID BATTLE

In a hotly-contested battle, bidders had until last Saturday to submit their offers for the Reading-based utility, which is Britain's largest water and wastewater services company.

Thames provides drinking water to 8 million people and sewerage services to 13 million customers.

Other bidders included Qatar Investment Authority, the state investment arm of OPEC member Qatar, which made a joint offer alongside the infrastructure arm of Swiss bank UBS AG, and another suitor British financier Guy Hand's Terra Firma Capital Partners, sources close to the sale said last week.

The final price came in at the higher end of analysts' expectations of between 7 billion and 8 billion pounds.

In November last year, RWE announced its plan to sell Thames Water and American Water by 2007. RWE has decided in favor of floating American Water in the United States.

RWE bought Thames Water for 7.1 billion euros in 2000 and in 2003 paid 4.5 billion euros for American Water.

The sale to Macquarie came after investment group Osprey Acquisitions raised its offer for another UK water company, AWG Plc (AWG.L) to 2.25 billion pounds last week.

The latest development gives RWE Chief Executive Harry Roels the much-needed room to make acquisitions to enlarge Europe's fourth-biggest utility if it wants to prevent RWE becoming a takeover target itself.

Analysts have said the company could become a target after selling its water businesses, because they currently serve as something of a poison pill for potential energy market buyers.

Shares in RWE have risen about 25 percent since the start of the year, in line with the pan-European sector index, as hopes of water business divestment offset worry over acquisition risks and uncertain energy regulations.

(Additional reporting by Siobhan Kennedy in London) Muzi.com News