Bream's dream of landing AWG falters

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The Independent Online

The chances of AWG, the owner of Anglian Water, being taken over in a £1bn deal financed by private equity appeared to be fading last night.

Bream Investments, the specially designed bid vehicle, was racing against time to get finance in place ahead of a Takeover Panel deadline of noon today to either "put up or shut up" in its four and a half month pursuit of chairman Peter Hickson's utility group.

AWG made it clear last night that it was highly unlikely to agree to an extension of the deadline set by the panel a fortnight ago. "This has been going on since January and we cannot hang on forever on the basis of moonshine promises," one source in the AWG camp said.

The company said that the only circumstances in which it might agree to an extension was if it was satisfied that Bream could put sufficient finance in place very rapidly to mount an acceptably priced bid, but this seemed unlikely.

Bream suffered a setback last week after its main financial backer, WestLB's principal finance arm led by Robin Saunders, pulled out. HBOS, the UK's biggest mortgage lender, was reported yesterday to have agreed to help finance the Bream bid after the German bank's withdrawal. HSBC and Royal Bank of Scotland were also named as possible providers of debt finance.

HBOS was said to have offered to lead a consortium of banks that would lend Bream £800m with a further £200m in equity finance coming from Star Capital Partners and Caxton-Iseman Capital of New York.

However, it appeared that the timetable set by the panel for Bream to make a formal offer was just too demanding. "We always said it was a very tight and challenging deadline," one source said.

The two individuals behind Bream are Francis Gugen, a former AWG executive who left the company 18 months ago after plans to demerge its water services division were abandoned, and Gordon Morrison, who sold his family construction company to AWG three years ago and was a former AWG board member.

Although the likelihood of the two men being able to raise the finance in time looked slim, one AWG executive said he believed they would keep trying until the last moment. "Francis Gugen is one of the most tenacious characters I have come across. He will explore all options right up until the end," the executive said.

Bream's last offer for AWG included an indicative price range of 520p-545p, valuing the company at £780m, but analysts have said the company is holding out for a price well in excess of 600p a share. AWG also has net debt of £3.3bn, meaning that a successful bid would cost more than £4bn.

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