Guy Hands is taking his £565m bid for Waste Recycling to the wire after last night's deadline for striking a deal passed without an agreement.
The former Nomura financier who struck out on his own a year ago, now has a three-day period of grace to seal a deal with the company and its 45.5 per cent shareholder Kelda, the owner of Yorkshire Water.
Under the terms of the exclusivity agreement signed in March by Mr Hands' buyout vehicle, Terra Firma, he had until midnight last night to make an offer valuing WRG at not less than 285p a share. At that price WRG's equity would be valued at £335m but Terra Firma would also take on estimated debts of £230m.
Kelda's chief executive Kevin Whiteman refused to comment on the prospects of a deal being reached, saying: "Discussions are continuing which may or may not lead to an offer for the company."
However, the market believes that WRG could slip through Terra Firma's hands. Last night the shares closed at 264p - well below the 285p minimum Mr Hands had undertaken to pay.
Mr Whiteman said that if a deal was done by the weekend, then Kelda's aim would be to return as much of the proceeds as possible to shareholders. Kelda's stake in WRG is worth £152m although it is carrying some debt on its own books relating to WRG, which it would would pay down first.
The exclusivity agreement required Kelda to pay up to £6m to Mr Hands if it sold its stake to another bidder. Waste Recycling, meanwhile was subject to a £1m break fee.
Kelda said it expected to outperform its regulatory targets by £240m over the five-year period to 2005. It expects to make £100m of savings on operating expenditure beyond efficiency gains required by the regulator Ofwat and deliver its capital investment programme for £140m less than the £1.4bn allowed by Ofwat. Pre-tax profits for the year to the end of March were up 8 per cent to £175m.