CONCERNS have been raised over jobs and services in the North East as a Hong Kong company closes in on Northumbrian Water.
The Durham-based business confirmed yesterday it had received a "non-binding indicative proposal from Cheung Kong Infrastructure Holdings Limited regarding a possible cash offer for the company".
Cheung Kong Infrastructure (CKI), which already owns Cambridge Water and has a 4.75% stake in Southern Water, invests in energy, transport and water infrastructure businesses.
The group, which revealed its interest in Northumbrian earlier this week, is controlled by Hong Kong-born billionaire Li Ka-shing, who is one of the richest men in the world.
It is estimated that CKI would have to pay in excess of £2bn to take over Northumbrian, which also runs Essex & Suffolk Water. Northumbrian said yesterday that there was no certainty an offer would be made and the negotiations are understood to have just started.
Durham City MP Roberta Blackman-Woods said yesterday: "This is a company that is very rooted in the region. Not only is it the largest private sector employer in my constituency but it does a lot of charity work.
"The previous chief executive was chair of the Regional Skills Partnership and the current chief executive supports that.
"They have also put an effort into keeping bills down and critically, they have put a lot of money into flood alleviation. That shows a link with the local community."
Northumbrian provides water services to 2.6 million people in the North East, where it employs 1,648 people.
It is not the first time in recent months that takeover talk has been swirling around the company. But a rumoured bid by its biggest shareholder the Ontario Teachers’ Pension Plan, which already owns 27% of the company, came to nothing.
Angelos Anastasiou, an analyst with Investec Securities, said water companies are attractive for investors seeking safe and steady returns.
He said: "Cheung Kong Infrastructure is most definitely serious as it has made an indicative approach. They know the sort of price they would have to pay. I would have thought it would be something over £2bn for the shares.
"They would have to do it with the agreement of the Ontario Teachers. There is a roughly 80% chance this will happen."
But he said that regulators would not allow too much consolidation in the water industry because of competition issues.
"You won’t get one of the big 10 water and waste companies being allowed to merge with each other," Mr Anastasiou said.
"It is possible that Cambridge Water is deemed small enough and could be pushed together with Essex & Suffolk."
Northumbrian made £738.1m in the year to the end of March with profits of £181m. Its shares have leapt by 9% this week since CKI revealed its interest in the company.
