AWG rejects £900m offer from West LB's private equity arm

AWG, owner of Anglian Water, has rejected a £900m bid from the private-equity arm of the German bank WestLB.

Robin Saunders, the financier in charge of WestLB's high profile buy-out business, pitched an informal offer to the company at a 20 per cent premium to the current share price.

But the board of AWG last week decided that the 510p- a-share bid substantially undervalues the group.

The company confirmed yesterday that Ms Saunders made "a preliminary verbal approach" on 31 January.

AWG said: "The proposal was subject to a number of conditions, including the approval of the board of WestLB and the resolution of issues arising out of WestLB's ownership of Mid Kent Water."

WestLB backed a £106m management buy-out of Mid-Kent in 2001 and Ms Saunders now chairs the company. She is known to be interested in expanding its water assets, and is said to be considering a £2.2bn bid for Northumbrian Water, which has been put up for sale by its French owner Suez.

WestLB may yet be put off from its expansion ambitions by the risk that competition authorities will block any transaction. At the end of last year, the Government prevented Vivendi, which already owns some UK water groups, from taking over Southern Water.

Ms Saunders has plotted several audacious takeovers in the past two years, but many have failed to come off. She expressed an interest in buying BT's UK phone network and worked on a bid for the assets of Railtrack that had been placed in administration. She is currently frontrunner to win control of Odeon cinemas with a £450m bid.

Sources at AWG said they were taking the WestLB approach seriously, but remained sceptical that it would amount to a full bid. One said: "As Lord Weinstock of GEC once famously said, when I see your rabbit, I will shoot it. AWG is waiting to see Robin Saunders' rabbit." AWG's board, led by the chairman Peter Hickson, met last Wednesday to consider the approach but said it "fell well short of an acceptable price".

The company is struggling to rebuild its reputation in the City after the disastrous acquisition of Morrison, which is now the subject of a bitter legal battle. AWG claims Sir Fraser Morrison misled it over the financial state of his family-run construction group, a claim the Scottish grandee denies.

AWG geared up its water business last year to raise money for a push into asset management and private finance initiative work.