Two remain for Northumbria deal

CVC Capital Partners and Morgan Stanley’s private equity unit will compete in the final round of bidding for the UK water unit of French utility Suez.

The £2bn auction to acquire UK water company Northumbria is set to close in May after two groups were selected by the company’s owner to present final offers.

CVC Capital Partners and Morgan Stanley Capital Partners, the private equity unit of the US investment bank, have beaten off competition from a number of private equity groups vying for the unit. French utility Suez is selling the business to reduce its E27bn debt burden. The winner will be announced in early May.

Half a dozen firms were shortlisted to present bids for the business. Candover, Apax Partners and Australia-based Macquarie Bank submitted offers. Also in the running was Terra Firma which approached Suez with an offer, although Guy Hands, Terra Firma's chief executive, later ruled out a bid.

 

Suez acquired Northumbrian Water in 1996 for £817m, subsequently merging it with other UK assets including North East Water, Essex & Suffolk Water. Northumbrian is part of ONDEO, the water division of Suez. It has 4m water and sewage service customers, and reported pre-tax profits in 2001 of £92.4m on turnover of £436.1m.

 

Morgan Stanley is being backed by Royal Bank of Scotland, according to Reuters, and is being advised by Rothschild.

 

Attracted by the steady cashflows generated by utilities companies, the sector has often been targeted by private equity players across Europe. WestLB is currently in negotiations with AWG, the holding company of Anglian Water, over a deal to acquire the UK-listed business. Last week, the firm confirmed that it would be willing to offer between £918m and £961m for the group.

 

The revised proposal from WestLB Principal Finance is an all-cash offer in the range of 520-545 pence per share. The offer is expected to be rejected by the board of AWG, which is thought to be holding out for a price of around 600 pence per share.