Neau geau! Government blocks French bid for Mid Kent water

Directors of Mid Kent Holdings, one of the 19 smaller drinking water companies, were celebrating yesterday after the Government blocked a hostile takeover approach launched jointly by two French companies. General Utilities and Saur, the French companies, respectively own the neighbouring Folkestone and Dover Water Services and South East Water.

The move by Ian Lang, President of the Board of Trade, to ban the takeover came after an investigation by the Monopolies and Mergers Commission found such a deal would be against the public interest. The announcement sent Mid Kent shares plunging by 10 per cent from 635p to 572.5p.

Clearly relieved at the decision, Geoff Baldwin, Mid Kent chief executive, said: "I'm feeling drained after a year of tension. I'm looking forward to getting back to my in-tray, running a business again and seeing more of my wife."

The MMC's conclusions end months of uncertainty for Mid Kent, which has spent an estimated pounds 2m defending itself. Its controversial campaign played on the fears of French control, coming up with the memorable if unsubtle slogans "Eau Neau You Deaun't!" and "How L'eau can vous get?"

The dispute began when Saur and General Utilities, which together own 38 per cent of Mid Kent shares, asked to buy Mid Kent as part of a plan to maximise scarce water resources in the South-east.

As the row deepened, directors of Mid Kent accused their French-controlled counterparts of acting in concert at the company's AGM, held last May. The French had voted down a bonus scheme devised by Mid Kent for senior executives. The allegations persuaded the DTI to extend the MMC probe from September to December.

In his statement yesterday, Mr Lang backed the advice of the water regulator, Ian Byatt, that the takeover would not solve Kent's severe water problems. Saur and General Utilities, which is part of the vast Compagnie Generale des Eaux group, had wanted to construct a mini water grid across the region. They had complained that Mid Kent had the area's only reservoir, which it jointly owns with Southern Water.

However Mr Byatt said there could be no solution to the difficulties in a county which has as little rainfall as parts of Africa unless Southern Water, the region's water and sewerage company, was included. He said yesterday: "Now that the merger has been blocked it is important that Ofwat, working closely with the Environment Agency, can sort this issue out."

The findings also backed Mr Byatt's opinion that water company takeovers could prejudice his ability to make efficiency comparisons, a view which set Ofwat against the two takeover bids last year for South West Water. Mr Byatt said he was pleased the Government had endorsed this belief: "No remedy would outweigh the loss to the regulator of a comparator and the reduction in the potential for competition in the area."

However Mr Lang stopped short of asking Saur and General Utilities to reduce their stakes in Mid Kent.

Last night a spokeswoman for the two bidders said: "In the great scheme of things this was a small deal for the French. It is by no means a calamity."

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