Thames floats on but buyers are ready to dive in

Bidders set to lodge offers for £7bn water company next month despite listing plan
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The Independent Online

A trio of financial buyers are preparing bids for Thames Water even though its German owner, RWE, is pressing ahead with plans to float the company.

It has also emerged that Thames Water's 20 per cent stake in Metronet, the London Underground consortium, will be sold first, raising up to £100m for RWE.

Hong Kong conglomerate Cheung Kong Infrastructure Holdings is holding a beauty parade of banks before it appoints an adviser on its planned bid for Thames Water. Terra Firma, the buyout group run by Guy Hands, has appointed Citigroup as adviser. Australian bank Macquarie is also planning a bid.

The three are expected to submit initial bids next month for the UK's largest water company, which is estimated to be worth around £7bn.

RWE, which is being advised by Deutsche Bank and Goldman Sachs, announced it would dispose of Thames Water last November. Although it would prefer to float the water company, RWE was keeping the option of a sale open, it said earlier this month. It appointed accountancy firm Deloitte last week to help with due diligence and it is also interviewing financial public relations firms to work on the float.

Some bidders have expressed concern over how long the sale is taking. They had expected an information memorandum to be sent out next month for the sale to start in earnest.

But RWE, which has no plans to send out a memorandum, is not planning to review final bids until the end of July at the earliest.

The company expects to decide at the end of the summer or in early autumn whether to accept a bid for Thames Water or press ahead with a flotation.

RWE insisted this weekend that this position has not changed, despite the recent slump in global equity prices. Spread-betting firm CMC Markets and property group Sigma Capital Investments postponed their floats as a result of the downturn last week.

If equity markets do not recover, one argument for pressing ahead with a flotation is that investors would want to put their money into safe stocks with predictable cashflows such as regulated water companies. But the possibility of a float could also force up bids for Thames Water.