EPIC in talks to sell Thames Water stake

The New Zealand fund manager is entering ‘formal discussions’ over the sale of its 1.24% stake in Thames Water, the UK water utility. EPIC has also announced the ending of talks over a possible sale of its stake in Moto, the UK motorway services firm.

Equity Partners Infrastructure Company (EPIC), a fund manager based in Auckland, New Zealand, has announced in a shareholder update that it is entering “formal discussions” with respect to the sale of its 1.24 percent stake in Thames Water, the UK water utility.

EPIC said it would only recommend a sale if the offer represented “fair value” and that any final decision on a sale would be subject to the offer receiving 75 percent support in a shareholder approval vote.

It also said a sale would be subject to a pre-emption process whereby EPIC’s shares would be offered to Macquarie consortium shareholders prior to being offered to other shareholders, and that this process could take four to five months. Australia’s Macquarie led a consortium which acquired Thames Water for £8 billion (€8.9 billion; $12.9 billion) in October 2006. Thames Water is the UK’s largest water and sewerage company, serving 14 million customers in London and the Thames Valley.

EPIC cited three reasons for the sale of its Thames Water stake: debt reduction (“a key objective of the strategic review”); the repayment of its bank debt in its entirety; and the provision of liquidity to EPIC shareholders.

In March this year, EPIC – which was established four years ago – concluded a strategic review which recommended it deleverage at both the investment and fund level. It said it had been hit badly by the weakness of UK sterling compared with the strength of the New Zealand dollar, and said that the fund would in future shift its focus from the UK market to the New Zealand market.

As part of the same update, EPIC said it had “discontinued” talks regarding the possible sale of its stake in Moto, the UK motorway services group. It said a sale “was not achievable in a way which would have delivered sufficient, let alone best, value to EPIC’s shareholders”. The firm said it would “continue to look at all options” with respect to Moto as well as seeking a buyer for its stakes in Arqiva, the UK telecoms company, and Wales and the West, the UK gas distribution business.

Also in the update, it was revealed that EPIC shareholder Pyne Gould Corporation had agreed to acquire $14 million of debt that EPIC needed to repay to National Australia Bank as part of a debt facility worth $48 million in total. It agreed to buy the debt in two successive tranches of $7.5 million and $6.5 million (to conclude by 15 July).