KKR buys UK water firm from Alinda

Greenwich, Connecticut-based infrastructure fund manager Alinda Capital Partners (Alinda) has sold UK water utility South Staffordshire Group to private equity stalwart Kohlberg Kravis Roberts (KKR), the firms announced in a statement.

The sale price was not disclosed, but the deal will see KKR take over the firm’s two regulated water businesses: South Staffordshire Water, which serves a population of 1.3 million in the West Midlands, and smaller Cambridge Water, serving 300,000 people in East Anglia. In addition, the transaction also includes several non-regulated assets.

South Staffordshire Group’s management team will remain in place following the sale, KKR and Alinda said in a statement. Nomura acted as financial adviser and financing provider to KKR, with Clifford Chance having also counselled the private equity firm. Freshfields Bruckhaus Deringer advised Alinda on the deal.

Alinda originally bought South Staffordshire Group from Arcapita Bank, of Bahrain, in 2007, for a price thought to be in the region of £400 million (€474 million; $615 million). Arcapita Bank, in turn, had bought the water utility in 2004 for £245 million.

The UK water sector has been a beehive of activity this year. As reported last Friday, infrastructure fund managers Infracapital Partners and Citi Infrastructure Investors (CII) are exploring stake sales in Kelda Group, the parent company of Yorkshire Water.

Sources told Infrastructure Investor Infracapital is considering selling its entire 13 percent stake in Kelda, whereas CII, which owns 37 percent of the business, is mulling cutting down its holding to 20 percent. Estimates of the value put on the combined 30 percent stake up for sale vary widely, with press reports putting the figure anywhere between £1.5 billion and £2.3 billion.

The most recent deal in the sector saw Toronto-headquartered fund manager Aquila Infrastructure Management lead a consortium which acquired an unspecified minority stake in Thames Water, the UK’s largest water and sewerage company.

Earlier this year, an iCON Infrastructure-led consortium exited the UK’s Sutton and East Surrey Water company for an equity cheque of £164.5 million – reportedly generating a two times return for the sellers.

On average, sales in the UK water sector have been netting sellers a 30 percent premium to the assets’ regulated asset base.