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Thursday 11th of October 2007
October 9, 2007

Southern Water Takeover Bid From JP Morgan Succeeds

by Stewart Douglas

Story link: Southern Water Takeover Bid From JP Morgan Succeeds

UK water and sewer company Southern Water has today been the subject of takeover talks involving an Australian led consortium of investment banks and private equity funds, with an auction for the assets and trade of the business taking place over the course of the last few months.

The utilities company is presently owned by the Royal Bank of Scotland and has been today won over by the consortium including the Challenger Infrastructure Fund and JP Morgan to name but two in a bid worth just under an estimated value of £4.2 billion.

The consortium fought off bids from elsewhere, including JP Morgan rival Goldman Sachs, to steal the company from its present owners.  The company at present has a strong asset book value as compared to a comparatively low valuation, making it the ideal target for investment banks to move in.

It is thought that water and utilities assets provide a stronger long term return against the value of certain pension funds on the basis that they are almost guaranteed to realise a return to slightly offset riskier securities-linked investments.

The bid from CIF and JP Morgan will account for an aggregate of 59% of the total company holdings, with UBS also in on the act to the extent of 18% of the company holdings along with a 22% stake of other related miscellaneous investors.

Southern Water is among the fastest growing utilities companies in the UK supplying water to an increasing 2.3 million customers throughout the south of England.

The move sees the Royal Bank of Scotland freeing up some liquidity just days after it was suspected to be too heavily dependent on revenues from invested cash assets.  The sale will see the bank realise a profit on their initial investment stake, currently 49% of the company (with a 94% controlling interest), making it an apparent win/win situation for the finance giant.


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