Hong Kong buyer closer to £2.4bn takeover of Northumbrian Water

The period of due diligence comes after Cheung Kong Infrastructure (CKI) said it intended to offer 465p a share for the company, which serves 2.6 million people in the North East and 1.8 million through Essex & Suffolk Water.

CKI, which holds a joint 88 per cent stake in Leeds-based Northern Gas Networks, has told Northumbrian that it expects to complete the sale of Cambridge Water by the time of any firm offer for the business.

The Hong Kong firm has infrastructure assets worldwide and recently completed a joint £5.8bn deal to buy 170,000 miles of electrical network covering London, the South East and eastern England from France’s EDF.

It also owns stakes in the Northern Gas distribution network and Seabank Power, an electricity-generating company located near Bristol.

Northumbrian, which owns the huge Kielder reservoir in Northumberland, recently reported that profits rose by 6.3 per cent to £181m in the year to March 31.

Revenues increased by 4.7 per cent reflecting a five per cent price rise at the start of a new five-year regime agreed with regulator Ofwat.

The company is 27 per cent owned by Canadian pension fund Ontario Teachers, which reportedly tried to put together its own takeover bid last year.

More than a third of the UK’s infrastructure – including energy, water and transport – is now under foreign ownership, according to a report by the Office of Fair Trading (OFT).

In the past 10 years, Ferrovial of Spain has bought BAA, Germany’s RWE has acquired npower, and Australian bank Macquarie has taken control of car parks by buying NCP. German group Deutsche Bahn recently bought rail and bus operator Arriva.

The OFT said there were mixed findings on the impact of foreign ownership, with evidence of improved productivity and profitability in certain sectors, contrasted with negative effects for local communities when new owners look to restructure businesses.