Anglian acquires Morrison for £263m

Anglian Water yesterday moved further away from its roots as a regulated utility, with the £263m acquisition of a construction and outsourcing services business.

Anglian Water yesterday moved further away from its roots as a regulated utility, with the £263m acquisition of a construction and outsourcing services business.

The water and sewage company, which provides services to 5.8m people in the UK, announced an agreed deal to buy Morrison, for 385p a share in cash. The development prepares Anglian for the expected restructuring of the water industry, which would see the creation of a competitive market. This would allow water companies to outsource the running of their assets. Anglian said it will now be better placed to bid for such contracts, as well as similar outsourcing deals in other sectors, including transport.

Morrison is 43 per cent owned by two of its directors, Sir Fraser and Gordon Morrison. Shareholders can take half payment in Anglian shares and the brothers will take up this option, leaving them with 3 per cent of the enlarged group, along with £60m cash.

Chris Mellor, chief executive of Anglian, said yesterday's deal was a first for the water industry. He said Morrison and Anglian would be combined to form an outsourcing services and facilities management business. Mr Mellor said he was "in the process of reinventing Anglian Water and the water industry". He added: "At some point in the future, we could sell off the UK water and sewage assets. We would then be left with a rump that would be a very different type of company ... If we can do this, everyone else will be forced to follow."

Mr Mellor said that outsourcing had only just begun in the water industry. Beyond that there would be opportunities from the expected separation of the running of water assets from their ownership - which is dependent on future regulatory approval. If this split is allowed, Anglian would be able to bid for contracts to run water assets owned by other companies. Anglian would then also put its own water assets into a separate company.

Morrison, which started life as a traditional contracting firm in the construction industry, now derives half its turnover from support services such as long term maintenance contracts. Anglian has been behind its competitors in gaining a presence in non-regulated activities, and earlier this year reported its first profit from this division.