French to make £680m water bid

Lyonnaise des Eaux, the French utility and property group, is to bid for Northumbrian water.The size of the cash offer has not been disclosed pending an expected referral to the Monopolies and Mergers Commission.

Some City analysts expect Lyonnaise to pitch the bid at £10 per share, valuing Northumbrian at about £680m. After yesterday's announcement of the bid the company's shares rose by £1.28 to close last night at £8.70. A bid by Lyonnaise would also fall under the European merger regulations which would result in the Commission examining the competition issues.

Lyonnaise des Eaux has bought four water-only companies, now merged into North East Water and Essex and Suffolk Water. Jacques Petry, international water division president, said that Northumbrian would be a unique geographic and commercial fit and would complete the group's foray into the UK water sector.

"If we merge as we say we will, there will be opportunities for savings, economies of scale, and very clearly some of those will be passed on to customers," he said. Lyonnaise, which has worldwide sales of £11bn, would pay for Northumbrian from its reserves and from bank facilities. Northumbrian attacked the move as "unsolicited and unwelcome".

"There is an unacceptable absence of specific terms and it will create business disruption and expose shareholders, customers and employees to a prolonged period of uncertainty," the company said. It added that Northumbrian has had talks in the past with Lyonnaise on the initiative of the French group, with a view to Northumbrian buying certain assets. Northumbrian said: "Nothing has come of these discussions owing to Lyonnaise's unrealistic views on value."

David Cranston, Northumbrian's chief executive, said that he has been interested in building on the existing close relationship with neighbouring North East Water, in areas including billing, laboratory facilities, and technology systems. He added that cooperation could be achieved without any change in ownership.

Mr Cranston said that he is "surprised and frustrated" at the way in which Lyonnaise has approached the bid and at the lack of information available. He has asked the Department of Trade and Industry and the Takeover Panel - believed to have been contacted by Lyonnaise - if they can tell him what the French group has said about the proposed bid.

Ofwat, the industry regulator, said that any takeover makes it harder to compare the water companies for the purposes of setting price controls, but that this is not a reason to block the bid "provided the result is savings to customers". Ofwat is expected to look for substantial saving on customers bills.

The spokeswoman said that a key to regulating the industry is ring fencing the core water and sewage businesses in accounting terms, which is already done by the companies.

The Labour Party said that it is studying the issue and feels there are grounds for an MMC investigation. Jack Cunningham, shadow secretary for trade and industry, said: "The proposed takeover of Northumbrian Water by Lyonnaise des Eaux raises questions of competition policy, consumer protection and public interest in the water industry."

City analysts said that other water companies which may become bid targets include Welsh Water, Wessex Water and Southern Water. Unlike the regional electricity companies, the water companies are cash-negative in general. They also have massive capital investment programmes needed to meet their environmental commitments.

Welsh Water is regarded as attractive because of its unusual financial strength in the sector and Southern is seen as a target for another French group, Compagnie Generale de Eaux.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?