Natwest Share Discussion Threads

[darias] 22/7/2011 08:45

Well done Beardmore. Remind me to look at your posts more carefully in future.

News release 28/6 (Note 5th Paragraph)

Utility and infrastructure company Cheung Kong Infrastructure Holdings Ltd. (1038.HK), controlled by Hong Kong billionaire Li Ka-Shing, is considering making an offer for Northumbrian Water Group PLC (NWG.LN) in a deal that could value the U.K. water supplier at GBP2.6 billion.

The potential takover of Northumbrian Water comes as Hong Kong's richest Man has been increasing his investments in the utility sector overseas--including in New Zealand, Australia and Canada--to broaden the earnings base of his companies, given the difficulties of expanding in Hong Kong's mature market.

Hong Kong-listed CKI said Monday it's in the preliminary stages of assessing a potential cash offer for Northumbrian Water, and there's no certainty that an offer will be forthcoming.

Northumbrian Water said it had noted the announcement from CKI, and its board confirmed it hasn't received any proposal that could result in an offer or possible offer.

Analysts said they're positive on the deal -- which would further expand CKI's utility business in the U.K. -- but it may have to sell its stake in Cambridge Water if the deal goes ahead.

Cititgroup analyst Pierre Lau said CKI could buy a 50% stake in the deal, with the rest to be held by passive investors such as the Li Ka Shing Foundation.

"We are positive on CKI's potential cash offer for Northumbrian Water, which could lift its 2012 net profit by HK$455 million or 9%," he said.

"Investment risk is low, as CKI is familiar with the U.K. water business," he said.

Lakis Athanasiou, a utilities analyst at Evo Securities, said a bid from CKI would automatically be referred to the Competition Commission because of CKI's ownership of Cambridge Water.

"The Competition Commission will probably allow the bid, but with customer-price reductions that will very likely remove any synergy benefits," Athanasiou said. He added that any potential bid is unlikely to be completed before the end of the first quarter of 2012.

CKI owns a 100% stake in Cambridge Water, which it bought in April 2004. Any merger between U.K. water companies is automatically referred to the Competition Commission, likely postponing the completion of any deal by around a year.

The Competition Commission is an independent public body that conducts in-depth inquiries into mergers, markets and the regulation of the U.K.'s major regulated industries.

CKI's net 2010 profit from the U.K., the company's second-largest market after Hong Kong, nearly doubled to HK$1.18 billion from HK$616 million, driven by electricity assets it acquired last year.

In October, a consortium led by CKI and Power Assets bought Electricite de France SA's U.K. electricity distribution networks for GBP5.78 billion.

In May CKI also bought a 50% stake in Seabank Power Station, a 1,140 megawatt gas-fired power station near Bristol in the U.K., for HK$2.4 billion. It now owns a 25% stake in Seabank Power after it sold half of its interest to Power Assets for HK$1.2 billion in June.

[darias] 22/7/2011 08:41

Oops I was wrong.

[darias] 22/7/2011 08:39

It is the new series of "Pie in the sky". Cambridge is going to endorse Northumbrian Water to Richard Griffiths who will put in a counter bid.

[whackford] 22/7/2011 08:39

Beardmore - I think the infrastructure fund making the takeover currently owns Cambridge Water. Under Ofwat rules, you can only own completely one water co. Therefore, to go ahead with takeover, the fund must relinquish its holding in Cambridge.

In fact, I seem to recall a statement from NWG board which said that offer from the Hong Kong fund was conditional on it finding a buyer for Cambridge Water.

[beardmore] 22/7/2011 08:21

Whackford - Cambridge? Help the aged - what's that about?

[gateside] 22/7/2011 08:21

AGM is next week on the 28th so hopefully will get an update on takeover then

[whackford] 22/7/2011 07:58

I hope we soon hear due diligence completed.
Then there's the issue of how long it will take to find a buyer for Cambridge -maybe progress on that will be outlined at same time.

I cannot see the board recommending less than the £4.65, which is market expectation.

[praipus] 21/7/2011 13:42

Very interesting it does seem high: What are the potential outcomes?

1. Bid goes through at £4.65(?) everyone happy(?)

2. Big goes through some sort of merger compromise good for the bidder and the co. and OTPF perhaps but not for Pi's i.e. not all cash. Or at less than £4.65 for some currently unknown reason.

3. Hostile all cash counter bid: everyone happy.

4. Bid goes away. I.e.:Bidder unable to satisfy Regulators requirements, or bidder finds something awful in the accounts and pulls out.

5. Any others?

[darias] 21/7/2011 12:36

An indicative offer of £4:65 with holders at 12/8 being entitled to 9.7 dividend. Surely the share price should be worth more than £4:54 as this is equivalent to £4:45 taking the dividend into account.

OK the £4:65 is not definite but a 20p discount for risk is surely too high!

[alan@bj] 12/7/2011 16:36

My thoughts too, Arja.

[arja] 12/7/2011 13:34

suddenly taking off for some reason !

[alan@bj] 11/7/2011 14:40

I suppose the OTPF have to decide whether to make a bid themselves, sell to CKI, or sit tight with their 27%. Can't believe they'd do the latter though, as CKI would surely be making all the important decisions - what if they reduced the dividend, for example. I hope there will be a higher bid, but it's probably just wishful thinking.

[zeppo] 11/7/2011 10:35

I paid a broker's fee to get out at £4.12 ( aslo losing the divi and knowing that there is no fee if shares are held until the deal goes through) but bought into two other water companies, and FCRM. In the short term I look a mug but if there is a competitive bid for NWG or even if this bid goes through then hopefully my other water companies will benefit proportionally. FCRM is a long term utility play which had results out last Friday. Not without risk, if it makes progress then getting in early may look a sensible decision.


Good luck to all holders!

z

[ygor705] 11/7/2011 10:17

There remains the possibility that this could become a competitive auction. Ontario Teachers have always been keen on this company and this announcement probably means that it's "make your mind up time" for them. Not a time to be short imo.

[payney36] 11/7/2011 10:00

Damm sold these at £3.50 but they had gone as low as £2 but a profits a profit i suppose!Well done to all who held on.

[arja] 11/7/2011 09:55

tuning peg,
no, just a proposal subject to due dilligence and hence the share price only 446 area today so far. I think there is very little chance of a rival offer but anything is possible in markets .

[arja] 11/7/2011 08:55

edging up now and maybe it will get to 455 by end of day !

[tuning peg] 11/7/2011 08:32

Have the board actually recommended the offer? The wording of the statement doesn't indicate this. It looks like the board have at least got the initial offer raised to 465p. I think the board's actions keeps the door open for a rival offer. Also significant that we haven't heard anything from the Ontario Teachers Pension Fund yet.

[arja] 11/7/2011 08:12

I excpected it to open at about 455 to be honest ! Of course I realise it is not a done dael and no chance of offer being raised .

[alan@bj] 11/7/2011 08:10

What did you expect Arja? A cast-iron guarantee? Of course the offer has to be caveated, and may be reduced or withdrawn. But that doesn't mean it won't go ahead. Buying in at 442p doesn't give sufficient (potential) return for the risk in my view, but I very much doubt this won't go ahead.

[arja] 11/7/2011 08:04

not so certain it seems as can buy now at 442 !

[whackford] 11/7/2011 07:53

Looks like 465p it is then.

[gateside] 11/7/2011 07:29

Following the announcement on 1 July 2011 that Northumbrian Water had received a non-binding indicative proposal from CKI, Northumbrian Water now announces that CKI has made a revised non-binding proposal at 465 pence in cash per ordinary share for the Company.

Under the terms of the proposal, Northumbrian Water shareholders will remain entitled to receive the net final dividend of 9.57 pence per share in respect of the year ended 31 March 2011, due to be paid on 9 September 2011 to shareholders on the register on 12 August 2011

[craigends] 05/7/2011 15:44

Opto -could not agree more - big question now is he on losing streak? News from China re underestimated bank loans could make his entry in there a bit late.IMHO.

[optomistic] 05/7/2011 14:19

Haven't seen any comments from Neil Woodford.
It does highlight the fact that the pros don't always get it right!
Make your own judgment and stick by it does work sometimes :-)