Cheung Kong Infrastructure Led Consortium Plans Acquisition of UK Northumbrian Water at a Valuation of HK$62 Billion
2 August, 2011
A consortium led by Cheung Kong Infrastructure Holdings Limited ("CKI") has formed a company named UK Water (2011) Limited to acquire Northumbrian Water Group plc ("Northumbrian") in United Kingdom.
The consortium's members include CKI, Cheung Kong (Holdings) Limited ("CKH") and the Li Ka Shing Foundation ("LKSF") -- their shareholdings are 40%, 40% and 20% respectively.
This consortium has reached an agreement with Northumbrian on the terms of a recommended cash offer by which all of the issued share capital of Northumbrian will be acquired by the consortium via a Scheme of Arrangement under the Companies Act in the United Kingdom.
Northumbrian is listed on the London Stock Exchange. It operates a water supply, sewerage and waste water business in the United Kingdom.
Valuation of Northumbrian at HK$62 Billion
The enterprise value of this acquisition is about £4.8 billion (approximately HK$61.8 billion). This is made up of:
- Northumbrian's entire issued share capital of about £2.4 billion (approximately HK$30.9 billion), ie. an offer price of 465 pence per share (approximately HK$60); and
- the company's existing debt of about £2.4 billion (approximately HK$30.9 billion).
It is intended that the acquisition will be implemented by way of a court-sanctioned Scheme of Arrangement between Northumbrian and the shareholders. The offer is conditional upon, among other things, the sanction of the deal by the Court and approval by 75% of the Northumbrian shareholders who vote at the Court Meeting either in person or by proxy. It is expected that the acquisition will become effective in October 2011.
Northumbrian has announced today that its Board of Directors unanimously recommends that Northumbrian's shareholders vote in favor of the consortium's offer. Northumbrian's directors and its major shareholder, Ontario Teachers' Pension Plan, who hold 0.07% and 26.8% of its shares respectively, have already irrevocably undertaken to vote in favor of the offer.
Prior to reaching an agreement with Northumbrian on this offer, CKI has sold Cambridge Water to HSBC Bank plc for an enterprise value of £74.8 million (approximately HK$960 million) to comply with relevant merger rules in the United Kingdom.
CKI's Third Investment in 18 Months
Should the acquisition of Northumbrian go forward, it would mark CKI's third investment in the United Kingdom in the past 18 months following its purchase of Seabank Power in May and UK Power Networks in October last year.
CKI's UK Portfolio Increases To HK$65 Billion From HK$40 Billion
This proposed transaction, if completed, will further strengthen CKI's global portfolio of investments. CKI's portfolio of gas, water and electricity distribution in the United Kingdom amounts to approximately HK$40 billion. This acquisition, upon completion, will further expand the size of this portfolio in the United Kingdom to HK$65 billion.
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