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Enron's £1.4bn Takeover of Wessex Water Sparks Corporate Action in the UK Market

Strategic Insights

— 1 min read

British water utility sector witnessed a wave of corporate action after Wessex Water agreed to a £1.4 billion takeover by Enron Corporation, an American energy group based in Houston, Texas. This move marks Enron's first foray into the UK water market, three years after the US company invaded the UK electricity market. The deal has sent shares of other water stocks surging higher, with the City anticipating more takeover activity.

Key Takeaways:

  • Enron Corporation has acquired Wessex Water in a £1.4 billion deal, marking the first time an American player has entered the UK water market.
  • The takeover is part of Enron's strategy to build a leading company in the world's fragmented $300 billion market for water and waste management services.
  • Wessex Water operates in areas such as Avon, Dorset, and Somerset and has a strong management team, which will continue to lead the company under the Enron umbrella.
  • Enron has not ruled out further UK deals but will focus on integrating Wessex Water first, with plans to develop the company's international business.
  • Enron's chairman and CEO, Kenneth L. Lay, revealed that the company had chosen Wessex Water due to its position in the industry's performance tables and strong management.
  • The deal has sparked concerns about the loss of another stock market listing in the UK water sector, potentially reducing the pool of companies for comparison by the water watchdog, Ofwat.
  • City analysts have praised the 630p-per-share exit price, which represents a 28% premium to the previous close, and a multiple of 12.3 times Wessex's earnings last year.

Statistics:

  • £1.4 billion: The value of Enron's takeover of Wessex Water.
  • 28%: The premium to Wednesday's close of 493p, at which price the shares jumped by 24% to 611.5p.
  • 630p: The per-share exit price offered by Enron, representing a 28% premium to the previous close.
  • 12.3: The multiple of Wessex's earnings that the exit price represents.
  • $18.6 billion: Enron's valuation.
  • $105 million: Enron's profits before exceptionals in the last year on turnover of $20 billion.
  • 1989: The year in which Enron began its involvement in gas and electricity generation in the UK.
  • 3 years: The time since the US invaded the UK electricity market.

Sources:

  • (No specific date or publication date mentioned)

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