LONDON, Sep. 20, 2000 (Knight Ridder/Tribune )—The water sector fizzed into life today as Thames Water, the biggest company in the sector, was forced to disclose that it is close to sealing a UKpound 4.3 billion takeover deal at UKpound 12.15 a share.
News of the bid, thought to have come from cash-rich German giant RWE, sent ripples running through the sector with shares in most other quoted water companies in hot demand as investors anticipated an open season on takeovers.
Shares in Thames, which had been buoyed by bid rumours in recent days, soared more than 24 percent to 1139p, a rise of 224p.
"It's very, very positive for the sector," said UBS Warburg European utilities analyst Simon Hawkins. "It's about time something happened to get the sector set alight. It's cheap and we would expect to see some more of this."
The Reading-based company, which supplies around 12 million people in Britain, revealed few details about the approach but said in an unusually worded statement that it was in "advanced discussions" with an unnamed bidder about a recommended cash offer. Full details of the offer are expected early next week, possibly on Monday.
As well as the UKpound 12.15 offer price shareholders will be entitled to an interim dividend of 20p due to be paid in April plus last year's final dividend.
Thames, one of the most ambitious firms in the industry under the leadership of chief executive Bill Alexander, is known to have been seeking a partner to give it more clout in bids for lucrative international water contracts. It is advised by Lazard Brothers
RWE, one of Germany's biggest energy groups, made it clear earlier this year that it was scouring Britain, easily Europe's most open utility market, for acquisitions. It wants to build a multi-utility business in Britain and acquiring Thames would give it access to a huge and wealthy customer base. RWE shares fell 3 percent in Frankfurt on fears that it will have to issue shares to fund the deal. A spokeswoman for RWE said: "we do not comment on this kind of market speculation," but refused to deny the story.
RWE has a stake in the recently privatised Berlin water company but otherwise has little experience in the sector. The German water sector is highly fragmented and mostly run by local municipalities. A Thames takeover would mean that four major British water companies -- Northumbrian, Wessex and Hyder are the others -- as well as some smaller ones have foreign owners.
Thames has long been seen as one of the stars of the sector with strong management, a successful overseas strategy and ambitious plans to build up non-regulated income.
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© 2000, Evening Standard, London. Distributed by Knight Ridder/Tribune Business News.
