AWG to take legal action over Morrison purchase

AWG, the owner of Anglian Water, indicated yesterday that it is likely to press ahead with legal action against the former owners of Morrison Construction after taking a £100m write-off on its acquisition of the business.

The legal action relates to so-called "legacy contracts", which AWG inherited when it bought the company for £262m from Sir Fraser Morrison and his brother Gordon in September, 2000.

Gordon Morrison resigned from the AWG board when losses on the contracts came to light the following May and AWG was forced to take a £26m goodwill write-off.

AWG announced further goodwill impairment charges yesterday, taking the total to £60m, and wrote off £39.3m on the legacy contracts, the biggest of which was to build a cinema and retail complex outside Manchester called the Great Northern centre.

Chris Mellor, AWG's chief executive, said: "The legal investigation is virtually complete and we have been advised it would be inappropriate to say anything more at this stage."

A spokesman for the Morrison's said any legal action would be vigorously defended and maintained that any problems with the contracts in question had only occurred after AWG had bought the company.

The £100m charge, together with £50.7m of advisory costs relating to AWG's capital reconstruction, plunged the group into a £53.5m loss for the year to 31 March. At the pre-exceptional level, profits were lower than expected at £137.3m, against a forecast of £146m.

The group is issuing £1.5bn of bonds so that its regulated water business will be largely debt financed and returning about £450m of capital to shareholders worth 160p a share.