Northumbrian Water Up 11.76% Amidst Bid Speculation

The FTSE 100 rallied after a difficult start to close up 58.9 points or 1.1% at 5,247.4 after water utility companies in the FTSE 100 and FTSE 250 became the focus of investors' attention. The FTSE 250 company Northumbrian Water was the catalyst for gains throughout the sector, its own share price leaping 30.4p or 11.76% to 287.69, after speculation that a Canadian pension fund was poised to mount a takeover.

Dominic Turner - Monday, February 01, 2010

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The Ontario Teachers' Pension Plan already holds 27% of the company, has long expressed a wish to privatise it and is preparing a bid of 325p per share, or £1.7 billion, according to the Sunday Times. Lakis Athanasiou, an analyst at Evolution Securities said, in a note quoted on the Reuters website, "If confirmed, this [a bid] will establish a higher trading range for the other water stocks. The biggest beneficiary would be Severn Trent, followed by United Utilities."

Another FTSE 250 company, Pennon Group – which owns South West Water Limited – was also going well, closing up 25.5p or 4.96% at 540p, whilst in the top tier Severn Trent closed up 45p or 4% at 1,170p and United Utilities up 15p or 2.8% at 551.5p exactly as Mr. Athanasiou had predicted. Ernst & Young may also have correctly predicted that the five-year price review conducted by the Office of Water Services (Ofwat) – the regulator of the water and sewage industry in England and Wales would speed up mergers and acquisitions within the industry.


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