Barefoot Investor: Li Ka-Shing Approaches Northumbrian Water With $3.8 Billion Takeover Offer

Hong Kong billionaire Li Ka-shing’s Cheung Kong Infrastructure Holdings Ltd. (1038) made a 2.4 billion pound ($3.8 billion) takeover proposal for Northumbrian Water Group Plc (NWG) in its second foray into the U.K. in a year.

Cheung Kong Infrastructure, known as CKI, tabled a revised 465 pence-a-share non-binding offer for the Durham, England- based company, according to a statement today. Northumbrian Water jumped to an eight-year high in London trading.

CKI has invested in electricity, gas, water and road assets in New Zealand, Australia, China, the U.K. and Canada and has been looking for further acquisitions. Last year, it led a group that agreed to buy Electricite de France SA’s U.K. power networks for 5.8 billion pounds. Northumbrian’s board agreed to open its books to the potential buyer for a “limited period.”

The bid is “at the top end, it’s unlikely to be higher than that,” said Dominic Nash, a London-based analyst at Liberum Capital Ltd. “If the bid was far too low, they wouldn’t have opened the books” for due diligence.
Northumbrian rose as much as 5 percent to 447.60 pence, the highest since 2003. The stock has climbed 35 percent this year.

The revised offer follows a July 1 indicative proposal from CKI for Northumbrian, the supplier to about 4.4 million customers in the U.K. CKI notified Northumbrian that it will complete the sale of Cambridge Water Plc, which it acquired in May 2004, before making any “announcement of a firm intention to make an offer,” the U.K. utility said.

‘No Certainty’

“There can be no certainty that any offer will be made for Northumbrian Water, nor as to the terms on which any offer might be made,” the U.K. company said today.
Northumbrian shareholders will receive a 9.57 pence-a-share dividend due to be paid on Sept. 9, according to the revised offer.
“The current bid level, including the final dividend, is close to 475 pence, and we regard this as fair, and likely to be recommended by the board,” said Angelos Anastasiou, an analyst at Investec Securities.
The Ontario Teachers’ Pension Plan, which owns a 27 percent stake in the water utility, is likely to accept the offer based on the asset valuation, he said


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