|Thames to Buy Elizabethtown Water
Tuesday, November 23, 1999
The Associated Press
WESTFIELD -- A British utility has agreed to buy New Jersey water company E'town Corp. for $607 million, or $68 per share, the companies announced Monday.
Under the agreement, Thames Water PLC of London will also assume E'town's net debt, as of Sept. 30, of $341 million. The deal is subject to approval by U.S. regulators and could take nine to 12 months to complete.
It will take the form of a merger between E'town and a newly formed subsidiary of Thames Water, the companies said.
The purchase comes three months after another European water company,
Paris-based Suez Lyonnaise des Eaux SA, announced that it was buying 100 percent of United Water Resources Inc. for $1.8 billion. Suez Lyonnaise already owned 30 percent of the Harrington Park-based utility.
The sale, which faces regulatory approval in New Jersey and several other states, is expected to be finalized by the middle of next year.
E'town's holdings include New Jersey water utilities Elizabethtown Water Co. and The Mount Holly Water Co. The water companies serve more than 1 million people in Somerset, Union, Burlington, Hunterdon, and Middlesex counties and Chester in Morris County. The company also operates a sewage utility, Applied Wastewater Management Inc.; an engineering business, Applied Water Management Inc.; and a real estate company, E'town Properties Inc.
Thames Water is the third-largest global water service provider, behind Vivendi SA of France and Suez Lyonnaise, with more than 21 million customers and 12,500 employees worldwide. It serves nearly 10 million customers outside the United Kingdom.
For the 12 months ending Sept. 30, E'town had revenues of $159.4 million and earnings of $24.5 million. Thames Water's international operations generated profits of $33.8 million on sales of $104.9 million in the six-month period ending Sept. 30.
Thames Water's acquisition of E'town will boost its status as a leader in water treatment around the world, said the British company's chief executive, Bill Alexander.
"E'town brings us close to matching overseas what we have in the U.K.," Alexander said. "We'll soon see our profits from international operations growing even more."
E'town Chairman Anne Evans Estabrook said her company's board believes the affiliation with a larger international company will benefit stockholders, customers, and employees alike.
Under the agreement, Thames Water agreed to a one-year moratorium on any layoffs from the date that the acquisition is completed, said E'town spokeswoman Erin Reilly. E'town has about 420 employees, she said.
Shares of E'Town Corp. rose 10 1/4, to 62 1/8, on the New York Stock Exchange.
Copyright © 1999 Bergen Record Corp.
From E'Town's Headquarters:
Thames Water Plc Proposed Acquisition of E'town
The View from London
|Thames buys E'town for $922.8 million
Updated 3:27 PM ET November 22, 1999
By Mike Elliott
LONDON (Reuters) - British utility Thames Water Plc, facing regulatory constraints at home, Monday took the latest step in its strategy of expanding overseas with the 575 million pound ($922.8 million) buy of U.S. utility E'town Corp.
Thames is paying 367.9 million pounds cash and will assume $206.7 million pounds of the U.S. water company's debt.
The move prompted a fall in Thames shares on worries over the high price paid. "Fund managers in general are averse to acquisitions in regulated industries," said one sector specialist. "The same thing happened to (British power utility) Scottish Power when it went for (U.S. based) PacifiCorp."
But Thames was confident it could make the acquisition pay.
"It's a substantial bite, but given the scale of Thames Water we're not uncomfortable in terms of its impact on the balance sheet," Finance Director David Luffron told Reuters.
Thames said the acquisition in New Jersey would provide for further expansion in the North American market and was expected to enhance earnings in the first full year of ownership.
The group also said it had appointed former U.S. senator and Northern Ireland peacemaker George Mitchell to its newly-formed International Advisory Board. Mitchell has worked on water legislation in the U.S.
Thames is paying $68 for each E'town share, which had closed Friday at $51-7/8. E'town achieved operating profit of $51.6 million on sales of $145.5 last year.
"This transaction will reinforce our position as the leading company solely focused on providing water and waste water operations and services around the world," Chief Executive Bill Alexander said in a statement.
Thames shares, which have underperformed the FTSE All Share index by almost 30 percent in the year to date, closed down 3.9 percent at 884-1/2p.
"People are worrying whether they've paid too much," said William de Broe analyst Nigel Hawkins.
"On a per-customer basis they've paid a lot more than Kelda did for Aquarion, and they were seen as paying too much," said Hawkins, referring to the proposed $444 million purchase by Kelda Group Plc -- formerly known as Yorkshire Water -- of U.S. water supplier Aquarion Co.
But analysts pointed out that with a payment of around 14 times EBITDA (earnings before interest tax, depreciation and amortisation), the purchase compared well with French group Vivendi's purchase of U.S. Filter earlier this year at 15.3 times EBITDA.
AWAITING FINAL OFWAT PROPOSALS
Thames has been looking to expand overseas to help offset tough regulatory prices controls at home by industry regulator OFWAT that could eat into the company's cash flow.
In July, OFWAT chief Ian Byatt had proposed that the water companies make an average price cut of around 14 percent next year and raise them by no more than inflation in the following four years. His final proposals are due out Thursday.
E'town would boost Thames's U.S. revenues threefold to around 150 million pounds a year, and give it the means to expand even further in the world's biggest water market.
"It's a good strategic platform for taking off in the U.S.," Alexander told Reuters in a telephone interview.
Thames said it saw "significant new opportunities" in the North American market and believed the two groups together would be in a strong position to secure further business.
The deal would be subject to regulatory approval but this was expected to be secured before the last quarter of 2000.
Thames already operates in Australia, China, Indonesia, Malaysia, Puerto Rico, Thailand and Turkey. In May, the group said it was linking up with Electricidade de Portugal to focus
on water and water treatment in Portugal and South America.
Earlier this month, Thames reported first half pre-tax profits before exceptional items of 204 million pounds, from 207 million the year before. International operations contributed 11 million pounds, up from six million.
LONDON (November 23, 1999 6:23 a.m. EST -
From London Times:
British water utility Thames Water agreed to buy U.S. water company E'Town Corp. (parent of Elizabethtown Water) for $590 million in a bid to expand overseas and boost its status as a world leader in water treatment, said the British firm's chief executive Bill Alexander. Thames Water has 12 million British customers and almost 10 million overseas. E'Town CEO, Andrew Chapman, could not be reached by the Water Industry Council for comment.
E'Town operates in New Jersey and owns several utilities providing water, sewerage and
engineering services. It has 1 million customers for water alone.