Yorkshire Water in pounds 385m US deal
Wednesday 02 June 1999
Yorkshire, which also announced plans to change its name to Kelda Group, has agreed to buy Aquarion, which supplies 141,000 homes in Connecticut and Long Island, New York. Under the deal, Yorkshire will pay $444m for the equity of Aquarion - a 20 per cent premium to its closing price last Friday - and assume a further $150m of debt.
Kevin Bond, Yorkshire's chief executive, said he hoped to receive regulatory clearance for the deal by next March, and added that the takeover would give it an excellent platform for further expansion in the north east region of the US. Yorkshire has about $300m to spend on bolt-on acquisitions.
Aquarion owns two water suppliers - BHC and Sea Cliff Water Company and serves 500,000 people including the inhabitants of Fairfield, Connecticut - one of the most affluent communities in New England and home to many New York bankers. It is also the largest private landowner in Connecticut. Last year Aquarion made pre-tax profits of $34m on turnover of $117m.
Yorkshire's move into the region mirrors the strategy being pursued by the electricity transmission company National Grid, which is buying New England Electric Systems. Mr Bond said the decision to expand overseas was a direct result of the harsher regulatory environment it was facing in the UK. Aquarion is allowed to earn a 12 per cent rate of return against the 6 per cent allowed here under the current price control formula.
However, the water regulator, Ian Byatt, has recommended a 15-20 per cent cut in Yorkshire Water's charges next April, when new five-year price controls take effect. Yorkshire is also inhibited from buying another large UK water company under present takeover rules.
Although only 17 of the 64,000 water companies in the US are quoted, Mr Bond said Yorkshire saw a lot of scope to expand by acquiring small "Mom and Pop" water companies and municipal water companies as operation was turned over to the private sector.
Yorkshire is aiming to generate half its turnover from businesses other than its regulated UK operations within five years.
The name change to Kelda - a Norse word meaning source of water - was being made to ease confusion among customers between the regulated water and sewage arm and Yorkshire's other businesses.
News of the US acquisition came as Yorkshire reported an 8 per cent rise in pre-tax profits last year to pounds 222m and raised the dividend for the year by 10 per cent to 22.35p.
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