Newspaper article The Christian Science Monitor

French Thirsty for British Water Shares

Newspaper article The Christian Science Monitor

French Thirsty for British Water Shares

Article excerpt

GIANT French companies are eyeing Britain's privatized water industry -- stock market valuation 12 billion ($19.4 billion) -- hoping to swallow large gulps of it.

One French conglomerate is already preparing a takeover bid that, if successful, would make it the supplier for 4 million residents in northeast England -- about one-tenth of the English market.

Last month, Lyonnaise des Eaux said it planned a takeover bid for Northumbrian Water, one of 10 water and sewerage companies in England and Wales that were sold by the government to the public in 1989.

The move by Lyonnaise is raising concerns among the "Big 10" British water companies about which one will be bought next, industry analysts say. Two other major French water conglomerates -- Companie Generale des Eaux (CGE) and Bouyagues -- are also reportedly licking their lips over purchasing British water suppliers.

The floodgates to French investment officially opened in December with the lapse of the "golden share" provision. Under the 1989 privatization, the British government retained a golden share in the water company stocks, thereby limiting foreign investment and blocking takeovers.

Even with the limitations, the French have been positioning themselves for a major stake in British water companies since privatization began.

In 1989, French companies began buying blocks of shares in English water companies, staying within the limits imposed by the government. Lyonnaise made a shrewd investment in a string of small water companies unprotected by the golden share provision, and later merged them to create North East Water.

Now Lyonnaise appears to ready to merge Northumbrian and North East Water and may be preparing northeast England as a likely bridgehead for further investment in British water services. A merger of the two companies would be "an excellent fit in terms of geography and our own activities," diplomatically states Jacques Petry, president of Lyonnaise's international water division. …

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