Tapping into £4 billion water deal

11:10am Tuesday 4th September 2007

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THE firm supplying water to hundreds of thousands of Hampshire homes is the subject of a £4 billion bid from American firms.

US giant General Electric has teamed up with American bankers Goldman Sachs to move for Southern Water.

Both have already made their mark in Hampshire with major takeovers.

Aviation to financial services conglomerate GE, by some measures the second biggest company in the world, bought Smiths Aerospace, which employs more than 1,000 at sites in Hamble and Chandler's Ford, in a £2.4 billion deal in January.

Goldman Sachs headed the consortium of international investors that bought Southampton docks owner ABP in a £2.8 billion deal last August.

Now the pair have joined up to target Southern Water, which provides water to one million homes and treats dirty water from two million in Hampshire, Sussex and Kent, has about 2,000 staff and estimated assets of £2.9 billion.

Southern was put on the market by current owner, the Royal Bank of Scotland's private equity division.

General Electric joins other big-hitters in the Goldman consortium including Australian property and infrastructure firm Babcock & Brown.

The consortium is said to be up against a rival team led by investment bank Morgan Stanley.

The asset-rich utility sector has been seen as a prime target for takeover activity. Recent deals include a £2.25 billion move on Anglian Water by a private equity firm.

Thames Water has also been snapped up by Australian investment firm Macquarie.

The water industry is attractive to investors because of the reliable cash income each utility generates.

Goldman Sachs declined to comment, while General Electric was unavailable for comment on the story.

Southern Water, which made pre-tax profits of £61.4m in the year to March 31 2006, was bought by RBS and French environmental services group Veolia in a £2 billion deal in 2003. Last year the French group sold its 25 per cent interest in Southern to RBS.