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Monday, 22 November, 1999, 15:44 GMT
Thames buys US water firm
ian byatt Industry regulator Ian Byatt's price controls mean firms are looking further afield

Thames Water has taken another step in its strategy of expanding overseas with the 575m ($923m) purchase of US utility E'town.

Thames is to pay 367.9m cash and assume 206.7m of the New Jersey-based water company's debt.

Thames is paying $68 for each E'town share, which closed on Friday at just under $52.

Finance Director David Luffron said the deal was a "substantial bite", but Thames was "not uncomfortable in terms of its impact on the balance sheet."

The company said the deal would provide "significant new opportunities" in the world's biggest water market.

It believes that together the two companies will be in a strong position to secure additional business and profit from sharing best operating practices.

The deal is expected to enhance earnings in the first year.

It will be subject to the approval of the New Jersey Board of Public Utilities and the US anti-trust authorities. Approval is expected to be secured before the last quarter of 2000.

"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's share price, which had underperformed the FTSE All Share index by almost 30% so far this year, was 36p lower at 884p at close of trade on Monday.

Beating the regulator

Thames has been looking to expand overseas to help offset regulatory price controls at home by industry regulator Ofwat.

In July, Ofwat chief Ian Byatt proposed that the water companies should make an average price cut of 14% next year and raise them by no more than inflation in the following four years.

His final proposals are due out on Thursday.

Last month, industry body Water UK said the price cuts, and environmental plans to be imposed next year, could result in the loss of up to 9,000 jobs in the industry.

Thames Water recently appointed former US senator and Northern Ireland peacemaker George Mitchell to its new International Advisory Board.

The company already operates in Australia, China, Indonesia, Malaysia, Puerto Rico, Thailand and Turkey.

In May, the company announced that it was linking up with Electricidade de Portugal to work together in both Portugal and South America.

Thames recently reported a six month pre-tax profit of 204m, from 207m the year before. International operations contributed 11m, up from 6m last time.

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See also:
21 Nov 99 |  UK
Call to slash water bills
22 Nov 99 |  Business
UK 'has highest water profits'

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