TeachersÔÇÖ eyes UK utility bid

Ontario TeachersÔÇÖ Pension Plan is considering a $2.7 billion bid for UK utility firm Northumbrian Water, according to UK newspaper the Sunday Times.  The $91 billion pension fund already owns 27 percent of the water company and now wants to buy the remaining stake, the newspaper said. It has reportedly approached other funds to be a partner in the deal, including the Canadian investment group Borealis. TeachersÔÇÖ is understood to have long wanted to take Northumbrian private, according to the newspaper. Northumbrian supplies water and waste water services in England, providing sewerage services to 2.6 million people in England's north-east; and water to 1.7 million people in the south-east under the name Essex & Suffolk Water. In its last six-month reporting period, Northumbrian posted profits of $148 million. The group's shares closed at 258.6p on Friday, valuing the company at approximately $2.2 billion. TeachersÔÇÖ will have to offer a sum above this level in order to win shareholder backing for the deal. However the fund is unlikely to offer above $2.7 billion, as its existing stake in the company is likely to deter counter bids from other parties. TeachersÔÇÖ paid around $616 million for a 25 percent stake in Northumbrian in 2005ÔÇöa two percent premium at the timeÔÇösaying it was interested in long-term investments in the water sector. Recent regulatory changes in the UK water sector have seen water companiesÔÇÖ price increases tied to inflation, prompting concerns that, coupled with higher costs of borrowing, this could play havoc with the UKÔÇÖs four publicly-listed water companies. Two of the companiesÔÇöUnited Utilities and Severn TrentÔÇöreduced their dividends; however, Northumbrian said it would continue to increase its payouts. It is thought that the UKÔÇÖs Takeover Panel will press TeachersÔÇÖ to make its intentions clear. TeachersÔÇÖ has made several purchases in the UK in recent months. In January, it bought Acorn Care and Education; and in December, it raised its existing stake in Bristol International Airport. Northumbrian, a FTSE 250 company, is expected to publish an interim management statement today to update the market on its trading, without commenting on the bid speculation. Both parties have so far declined to comment on the reports. Established in 1989 and headquartered in Toronto, Ontario, TeachersÔÇÖ employs around 700 people.