Kelda Group plc ("Kelda") announces that its US subsidiary, Aquarion Company ("Aquarion") has entered into legal agreements to acquire four New England water supply businesses from American Water Works Company Inc ("AWK").
The four businesses supply water in the states of Connecticut, Massachusetts, New York and New Hampshire, close to Aquarion's main operations in Connecticut.
The acquisition will grow Aquarion's water supply business by approximately 50 per cent and is consistent with Kelda's strategy for growth in the US market.
The consideration will be two times the book value of the net assets of the acquired companies at the time of closing, which is anticipated to be about $118 million in cash, plus the assumption of $115 million of debt. It will be funded from Kelda's existing cash resources and debt facilities.
The water companies being acquired are Connecticut-American Water Company, Massachusetts-American Water Company, New York-American Water Company, and Hampton Water Company. Together they supply water to 64,000 customer accounts or a population of 177,000 in Connecticut, Massachusetts, New York and New Hampshire.
Over 60 per cent of the customers are located adjacent to the existing franchise of BHC, Aquarion's main water supply subsidiary. Massachusetts Capital Resource Company, a finance subsidiary of AWK which owns and leases certain assets to Massachusetts-American, will also be acquired as part of the transaction.
For the year ended 31 December 2000, the aggregate turnover of the companies to be acquired was $47.3million with profit before tax of $8.5 million and the companies had net assets of $59 million as at that date.
Kelda's Executive Chairman John Napier said: "This acquisition is a logical next step in the expansion of our US interests. Our first USA investment, Aquarion and its management team has performed very well. This second acquisition has an excellent fit with our existing business in New England and offers the prospect of ongoing value creation. It is expected to be earnings enhancing from the time of closing."
Kelda acquired Aquarion in January 2000 to provide a platform for growth in the US. The acquisition of the American Water businesses is a significant expansion in the New England region of the US where Aquarion operates. The main operations in Connecticut will be integrated into Aquarion's existing water supply operations.
The transaction is conditional upon various US regulatory approvals including expiration of the waiting period under the Hart-Scott-Rodino Act and regulatory approvals in the relevant states. It is anticipated that these will be received in the first half of 2002.
Background Information:
Aquarion Company, which was acquired by Kelda in January 2000, is headquartered in Bridgeport, Connecticut. Its principal business is water supply through its BHC and Sea Cliff Water Company subsidiaries. BHC provides public water to 29 towns in Connecticut. Sea Cliff serves six towns on Long Island, New York. They serve 146,000 homes and businesses, or a population of more than 500,000, and form one of the 10-largest private water companies in the US.
Aquarion, through its Aquarion Management Services and Environmental Engineering & Remediation Company subsidiaries, provide contracted water and waste water operating and engineering services to large and small municipal and private utility systems in the Northeast. Aquarion also owns a timber processing company called Timco. In the year to March 31 2001, Aquarion reported sales of approximately US$115 million.
The systems being acquired from American Water service 64,000 customer accounts, or a population of 177,000 in 17 municipalities located in four states. More than 60 percent of these customers are located adjacent to Aquarion's existing BHC franchise in Connecticut. For background, its operations in New England follow:
Connecticut: 27,000 customer accounts, or a population of 87,000 in 6 towns.
Massachusetts: 17,000 customer accounts, or a population of 26,000 in 5 towns.
New Hampshire: 8,000 customer accounts, or a population of 20,000 in 3 towns.
New York: 12,000 customer accounts, or a population of 44,000 in 3 towns.
