AWG puts on shares spurt as rival bidders stalk Anglian Water

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A bid battle is set to break out over AWG after the owner of Anglian Water disclosed that it has received other approaches in addition to the £2.2bn offer from 3i and a group of overseas pension funds which the company's board yesterday recommended.

Shares in AWG surged to close at 1,620p - some 4 per cent above the agreed 1,555-a-share offer from Osprey Acquisitions, a specially-created bid vehicle comprised of 3i and three Canadian and Australian pension funds.

AWG declined to identify the rival bidders but it is thought that the group has received approaches from two other consortia made up of private equity firms and pension funds.

In an attempt to ward off a rival bid, Osprey yesterday acquired the 11.7 per cent stake in AWG owned by its biggest shareholder, Amvescap. The AWG board has also agreed to allow Osprey to match any higher offer and pay it a break fee of £22m if it accepts a rival bid, making it more expensive for another consortium to mount a successful takeover.

The offer for AWG came as Macquarie, the acquisitive Australian bank, freed itself up to buy Thames Water by selling off its existing UK water business, South East Water. The business has been bought by another Australian bank, Westpac, for £665m.

Macquarie is one of three bidders in the running for Thames - the other two being Guy Hands' Terra Firma and a partnership between UBS and the investment branch of the Qatar government.

There is speculation that Macquarie might bid for AWG if it loses out in the auction for Thames. Another potential bidder for AWG is Alinta, the Australian infrastructure operator.

AWG said it had received approaches from "certain third parties" but there was no certainty that an offer would be made. In the meantime, it continued to recommend the Osprey offer.

The 1,555p bid represents a 14 per cent premium to AWG's share price the day before it announced the approach from the Osprey consortium. 3i has a 16 per cent stake in the consortium. The other members are Canada Pension Plan and Australia's Colonial First State and Industry Funds Management.

Graeme Bevans of Canada Pension Plan said Osprey had been attracted to AWG because it was the largest water company in England and Wales by area covered and serving one of the country's fastest-growing regions. He said Osprey was very keen to retain the existing AWG management, led by chief executive Jonson Cox.

AWG serves 5.4 million customers in eastern England. It also owns a water company in Hartlepool, Co Durham, and the construction company Morrison.