Terra Firma to acquire UK water utility

Having missed out on South Staffordshire Water, the investment firm run by Guy Hands has agreed to acquire publicly listed East Surrey Holdings for £453m.

London-headquartered Terra Firma Capital Partners has agreed the terms of a recommended acquisition of UK public water utility company East Surrey Holdings with its independent directors.

The proposed cash offer of 525 pence per share values the company at £453 million (€659 million; $847 million). The offer is being made through a Terra Firma-formed holding company Kellen Acquisitions.

The offer represents a 23.8 percent premium to East Surrey Holdings’ ordinary share price of 432 pence at the close of business on April 5, 2005.

Under the terms of the proposal, the aggregate amount of shareholder equity and debt will be approximately £262 million and Kellen has arranged £458 million of debt facilities underwritten by Barclays Capital and Citigroup.

Commenting on the offer, CEO Guy Hands said in a statement: “East Surrey Holdings fits perfectly with our investment strategy of targeting asset-intensive businesses with strong and reliable cash flows operating in basic service industries.”

In October last year Terra Firma missed out on the acquisition of UK water supplier South Staffordshire. Crescent Capital, the UK subsidiary of First Islamic Investment Bank (which has since been renamed Arcapita), acquired the company for £142.6 million, despite strong interest from Terra Firma.