Wessex Water Seeks Control of UK Waste as Default Notice is Triggered

Strategic Insights -

Wessex Water is poised to take control of the remaining shares of UK Waste, following a default notice issued by the water company after the change of ownership of Waste Management Inc, its American partner. The UK Waste profits fell by 10% last year due to a sharp decline in waste paper prices and a management vacuum, but Wessex believes it now has the expertise to manage the operation and has started preparations to restart the acquisition programme.

Key Takeaways:

  • Wessex Water issued a default notice to UK Waste, entitling it to purchase the remaining 50% of the company at a "fair value".
  • The default notice was triggered by the change of ownership of Waste Management Inc, the original American partner of Wessex Water.
  • Analysts estimate that Wessex Water would have to pay between £150 million and £220 million to acquire the remaining shares of UK Waste.
  • UK Waste's profits fell by 10% last year due to a sharp decline in waste paper prices and a management vacuum.
  • Wessex Water has made no secret of its desire to take control of UK Waste and has started preparations to restart the acquisition programme.
  • The company will hire several top executives to manage the operation and achieve efficiency and service standards.
  • Ofwat, the industry regulator, has announced that it will provide incentives for companies to improve efficiency and service to customers.

Statistics:

  • £150 million - estimated price for Wessex Water to acquire the remaining shares of UK Waste.
  • £220 million - estimated price for Wessex Water to acquire the remaining shares of UK Waste.
  • 10% - decline in UK Waste's profits last year.
  • 50% - stake of UK Waste that Wessex Water does not already own.
  • 1991 - year in which UK Waste was formed.
  • 14.9% - Rights issue by Waste Management that lifted its stake in Wessex Water.
  • 20% - Stake in Wessex Water held by Waste Management after its rights issue.
  • 1997 - year in which Waste Management sold its shares back to Wessex Water.
  • February - month in which Waste Management sold its shares back to Wessex Water.

Sources:

  • The Times, 1998.