AWG agrees to $4.1 bn bid offer from Osprey
British water firm AWG said on Monday it has agreed a £2.2 billion ($4.1 billion) takeover offer from Osprey, an investment group including Canadian, Australian and British firms.
The investment group comprising Canada Pension Investment Board, Colonial First State Global Asset Management, an asset management division of Commonwealth Bank of Australia, Industry Funds Management and 3i Group plc said it was offering 1,555 pence per AWG share in cash. The offer represents a premium of 14.2% to AWG’s closing share price on September 13, the last business day before AWG announced it had received an approach that may or may not lead to an offer and a 0.6% premium to Friday’s close of 1,545p.
“The board of AWG has considered the offer, very carefully and unanimously recommends it to shareholders,” AWG, which supplies water and sewerage services in the East Anglia region of eastern England — an area with a population of about 5.5 million, said.
Canada Pension Investment Board and Colonial First State Global Asset Management each own 32.3% of the consortium while Industry Funds Management has 19.4% and 3i controls 16.1%. “We are long-term investors and we are looking forward to supporting management’s strategy of concentrating on delivering first-class service to customers and on its regulatory obligations while seeking further operating and capital expenditure efficiencies,” the consortium said.
The offer values AWG shares at 25.3 times current financial year earnings, sharply higher than the UK water and utilities average of 13.6, according to Reuters Estimates. UK regulations make it very difficult for companies that already own water assets to buy another water company, leaving the door open for financial investors attracted by water firms’ stable cash flow.
Hastings Funds Management Ltd, a unit of Australia’s Westpac Banking Corp said they had bought British water utility South East Water for an implied enterprise value of £665.4 million . Several financial investors are also competing for Thames Water, which provides water and sewerage services in London and is being sold by German utility RWE AG for about £7 billion. Terra Firma Capital Partners, a consortium of UBS and the Qatar government, and another being formed by Australia’s Macquarie Bank Ltd are set to submit second-round bids for Thames on October 10.
—Reuters
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