Consortium increases offer for AWG

A consortium including 3i and the Canada Pension Plan Investment Board has increased its offer for UK water utility AWG from £15.55 to £15.78 as banks including Merrill Lynch and Macquarie Bank show interest in the event of failure to acquire rival business Thames Water.

Osprey Acquisitions, a consortium made up of global private equity firm 3i, the Canada Pension Plan Investment Board, Colonial First State Global Asset Management and Industry Funds Management, has increased its offer price for AWG, owner of Anglian Water.
 
The revised offer of 1,578 pence values AWG at approximately £2.246 billion (€3.3 billion; $4.19 billion) and is an increase on a 1,555 pence per share offer which was accepted by AWG’s board last week.
 
Press reports at the weekend indicated that other financial buyers, including Merrill Lynch, Babcock & Brown and Macquarie Bank, might make a competing bid for AWG.
 
AWG also said this morning that the consortium had acquired approximately 13.7 million shares representing 9.64 percent of the existing issued share capital, increasing its stake in the listed business to 21.11 percent.
 
If its takeover bid is successful, £1.55 billion of the transaction will be funded through equity, with Canada Pension Plan Investment Board and Colonial First State Global Asset Management each providing 32.3 percent; Industry Funds Management 19.4 percent; and 3i 16.1 percent..
 
Debt financing for the balance will be provided by Deutsche Bank.
 

AWG’s share price in 2006

The revised offer represents a premium of 41.7 percent to AWG’s average share price of 1,113 pence for the 12 months ending 13 September 2006, the last business day before the business received the initial approach.
 
At 10.45am BST today, AWG’s shares were trading at 1,598 pence, down from Friday’s closing price of 1,608 pence.
 
Macquarie is one of three groups that are understood to have made formal offers in the auction for Thames Water, another UK water company. Macquarie, which already owns South East Water through its Macquarie European Infrastructure Fund, is competing against Terra Firma Capital Partners and a UBS-led group.
 
Merrill Lynch is backing Terra Firma’s bid for Thames Water, alongside Morgan Stanley and Lehman Brothers, with final offers due later this week.
 
A source close to the Thames Water deal said that Merrill Lynch is currently looking at AWG on the basis that some of the losing bidders for Thames Water might switch their focus to AWG, in which case Merrill Lynch would look to co-invest in a competing bid. However, the source said today’s improved offer from the Osprey consortium might impact on interest in AWG.