Plumbing founder gets share stake worth £60m shares worth £60m after

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The Independent Online

Two entrepreneurs who started up a plumbing business 11 years ago will be worth £75m when the water division of their company is demerged and listed on the stock exchange next month.

Richard Harpin and his business partner Jeremy Middleton set up Homeserve as a joint venture with the utilities company South Staffordshire Group in 1993. The regulated water business is now being hived off from the group and will list on the stock exchange next month as South Staffs Water. The old group, which will then only consist of the plumbing and repairs business, will be renamed Homeserve.

The group is buying out the minority interest Mr Harpin and Mr Middleton have in the business by issuing new shares. Existing investors will get four shares in the Homeserve business and one share in the water group for every five shares held. Mr Harpin will end up with a 16 per cent stake in Homseserve, which together with his stake in the water company, will be worth around £60m. Mr Middleton, who will be a non-executive director of Homeserve, will have shares in the two companies worth £15m. Both Mr Middleton and Mr Harpin will receive a one-off £150,000 windfall for giving up their rights to dividends from the company, which have already given them millions in the past decade.

Mr Harpin has capitalised on the escalating prices charged by plumbers. Homeserve provides customers with an insurance policy to cover emergency domestic repairs such as broken boilers and wiring. For £55 a year, customers of Homeserve get up to £2,000 worth of emergency repairs cover. "This compares to a single call-out for a plumber that can cost £100 alone," Mr Harpin, who will become chief executive of Homeserve, said yesterday.

He added: "There is a real shortage of quality plumbers. All those young lads that would have trained in the trade are now all going off to university to do IT degrees, so there is a high demand for them. It is a real growth area and accounted for 80 per cent of the old group's profits last year, so it makes sense to separate the businesses." Homeserve, which has 2.6 million customers, had a turnover of £121m last year and operating profits of £25m.

Mr Harpin has a two-year lock-in on his shareholding post demerger, and is planning to stay on at the business. Mr Middleton can cash in when shares in Homeserve go ex-dividend.

South Staffs Water will be worth around £75m when it lists. Homeserve will have a market value of about £370m when it starts trading as a sole entity