Northumbrian Water has been sold by Suez to a consortium for GBP2.2 billion. The deal, which includes an unusually high proportion of equity, marks a change in the water industry. It could lead to further investment by Deutsche Bank and its partners in the water sector should opportunities arise.
Northumbrian Water has been sold by Suez to a consortium led by Deutsche Bank for GBP2.21 billion. The deal consisted of GBP1.01billion in assets, in the form of GBP880 million cash and GBP129.7 million in company shares, andGBP1.2 billion of debt of which Suez was relieved.
The Aquavit consortium will buy 75% of Northumbrian Water, reducing Suez's debt by E3.1 billion, but still leaving the company as the largest shareholder. Aquavit has 25 institutional stakeholders including Deutsche Bank, brokers Collins Stewart and financier EcoFin.
The sale marks a departure from recent deals in the water sector as it includes a relatively high proportion of equity. Recent deals in this sector have relied more heavily on debt, with the equity proportion below 10% in some cases, causing concern for the regulator Ofwat (Office of Water Services).
Northumbrian Water, now renamed Northumbrian Water Group plc, serves 4.3 million water and sewerage customers in the North East of England. It was the first water company to be bought following privatization. It will be returning to the stock market for the first time since 1995, with a listing on AIM. Ofwat is in favor of the listing, as it believes that this encourages greater efforts to improve efficiency.
Chief Executive John Cuthbert has emphasized that the new company will remain a pure water company. With this aim Aquavit will be interested in expanding its business through acquisitions in the water sector should opportunities arise.