Macquarie in £8bn water upset

Macquarie, one of Australia’s most active investment groups, has triumphed to snatch Thames Water from under its rival’s nose in an £8 billion ($14.9 billion; €11.9 billion) deal.

The result upsets what some reports had suggested was a done deal for the Qatar Investment Authority in the Goldman Sachs-run auction.

Macquarie said in a statement last night RWE, the German owners of the UK water utility had agreed to the sale.

The group, which enjoys a lower cost of capital compared to most of its rivals, defeated bids from a rival Australian group, Alinta, Guy Hands’s private equity firm Terra Firma and the Qatari group.

Macquarie said it was paying £4.8 billion leveraged with debt of £3.2 billion. The Macquarie consortium is also said to include Canada’s Alberta Pension Fund and ABP, a Dutch pension fund .

The deal may have further implications for the rest of the UK’s quoted water sector. Bidders pipped by Macquarie could turn their attention to one of several other UK water companies.

They include Severn Trent, which has just demerged its waste business Biffa, and Pennon, the owner of South West Water.  AWG, the owner of Anglian Water, is the subject of an agreed £2.3 billion bid from Canadian and Australian pension funds and 3i and might offer an opportunity for firms to co-invest.

Macquarie has pledged to provide more detail on the Thames transaction and its plans for the business later this month.