Monday 14 April 2014

Another Aussie scoop: SAS swoops on Yorkshire Water

An Australian investment group that manages pensions for the New South Wales police force has secretly purchased a multi-million pound stake in Yorkshire Water, one of Britain's largest water companies.

Top sources down under tell me that in recent weeks the SAS Trustee Corporation, also known as the State Super, bought a 10pc shareholding in Kelda - the company that owns Yorkshire Water - from Citigroup Infrastructure Investors and Infracapital, which is part of FTSE 100-listed insurer Prudential.

My Aussie sources (loyal Betaville readers should recall I have a few!) tell me SAS bought around 7pc of Kelda from Citigroup Infrastructure Investors and the remaining 3pc from Infracapital. Corporate financiers from KPMG are believed to worked with SAS on the acquisition of the Kelda stake.

According to its website, SAS is one of the largest public sector pension funds in Australia, with almost AUS$40bn under management.  

It's not clear, though, how much SAS paid for the Kelda shareholding.

Banking sources thought the Australian pension fund is likely to have paid between £200m and £500m for 10pc of Kelda, which supplies water and sewage services to 5 million people in Yorkshire.

The deal comes after Citigroup and Infracapital last year looked at selling 30pc of Kelda for £1.5bn to a consortium of investors that included German insurance giant Allianz. The transaction fell apart after both parties failed to agree on a price for the 30pc shareholding.

Citigroup and Infracapital teamed up with Singapore's state fund GIC to buy Kelda for almost £3bn at the top of the credit boom in 2007. GIC remains a shareholder in Kelda as does Deutsche Bank's Rreef fund, which I understand is now managing SAS's new investment in the water company.

SAS's move to buy a stake in Kelda may surprise some City dealmakers because Ofwat, the regulator, is currently carrying out a review that is not expected to complete until the end of the summer.

Some corporate financiers weren't expecting significant M&A activity in the water sector until Ofwat had published its draft determination.  

SAS's move, though, could encourage other potential bidders to pursue deals in the water sector.

Last year, I revealed (while working for Dow Jones's publications Private Equity News and Financial News) that Canada's  Borealis had teamed up with the Kuwait Investment Authority to mount a multi-billion takeover approach for Severn Trent, the FTSE 100-listed water company.

The consortium ultimately failed to agree a price with Severn Trent's board and it wasn't clear whether Borealis and the KIA would ever return for the water company.

However, earlier this year I revealed on that the Borealis consortium is considering making a fresh approach for Severn Trent after the six month lock up period from its last approach expired in December.

I called a spokesperson from Kelda to ask about the SAS deal and he has given me a statement which I have pasted below:

"Kelda Holdings Limited, the parent company of Yorkshire Water, confirmed that a new shareholder has come on board. An Australian pension fund, State Infrastructure Holdings 1 Pty Limited, has bought a 10% stake in the group, with two of the existing shareholders selling part of their holdings to
allow the acquisition. Both shareholders are maintaining a substantial shareholding in Kelda."  

I haven't had a chance to speak to the SAS Trustee Corporation as they are based in Australia but if and when I do speak to the fund, I will add their comments into the story.



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