Boardroom split as Hyder agrees to Nomura bid

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The Independent Online

Nomura, the Japanese investment bank, yesterday agreed to buy Hyder in a £2.3bn deal. It immediately ruled out both a break-up of the troubled Welsh water and electricity supplier and further job cuts.

Guy Hands, the head of Nomura's principal finance group, also voiced confidence that the takeover would get regulatory approval, and said he had no intention in the short term of funding Hyder by securitising its revenues.

Nomura is paying 260p a share for Hyder, valuing the company at £402m, and taking on £1.9bn of debt. Hyder is also facing a £1.1bn investment programme in Welsh Water.

Mr Hands, whose other deals have involved pubs, TV rental shops and Ministry of Defence homes, described the current financing of Hyder as a "bloody mess". He said he had some "innovative and proprietary ideas" for refinancing the business, but declined to go into details. "This is not going to be a short fix. It could take four to six years to solve all the problems at Hyder," he said.

Although the Nomura offer is recommended, two Hyder board members - the operations director Michael Brooker and commercial director John James - refused to back it. Mr Brooker was involved in a rival plan to break up the group.

Mike Kinski, the former chief executive of Stagecoach and, before that, Manweb and Southern Water, has been appointed chief executive. Graham Hawker, Hyder's current chief executive, and the finance director, Paul Twamley, are expected to leave once the deal is completed, and are in line for pay-offs of £365,000 and £276,000 respectively.

Mr Kinski has been working with Nomura on bid opportunities in the utilities sector for the past two months, and was offered the Hyder job by Mr Hands three weeks ago.

"Based on our discussions with the regulators, we are confident there will be no regulatory hurdles," said Mr Kinski. "We are keeping the vast majority of the Hyder management in place, bringing extra financial and operating strength to the company and keeping the business Welsh."

Nomura has ruled out any job losses beyond the 1,000 already announced at Welsh Water and Swalec, the majority of which have been implemented, and has agreed to keep the headquarters in Cardiff. Mr Kinski denied that the regulators had insisted on Nomura not securitising Hyder's revenues in order to fund the deal.

Mr Hands described the way Hyder was presently financed as a "complete mismatch", and said his main task would be align its financing more closely with its revenues, although this would depend largely on the agreement of its bondholders. Hyder had been told that it could cost £150m to repay or finance its debt.

The decision to sell to Nomura follows a three-month review by Hyder's financial advisers, JP Morgan and Dresdner Kleinwort Benson.