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RWE splashes out $8.9B
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September 25, 2000: 7:13 a.m. ET
German power utility buys Thames Water, forms world No. 3 water supplier
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LONDON (CNNfn) - German utility RWE AG made a big splash on Monday, agreeing to buy Britain's Thames Water PLC for £6.1 billion ($8.9 billion) in cash and assumption of debt, creating the world's third-largest water and waste treatment company.
RWE will become the water supplier for millions of homes in the London area after clinching the deal with a bid of 1,215 pence for every Thames Water share. That's almost 33 percent above the U.K. company's closing share price last Tuesday, the day before Thames told investors it was in talks about being acquired by an unnamed company.
 The German company has been on the acquisition trail for some months as falling electricity prices threatened the returns from its power business at home. With the acquisition of Thames Water, RWE is challenging the leadership of France's Vivendi Environnement and Suez Lyonnaise des Eaux in the world water services industry.
"Thames Water brings to RWE a strong management team with an impressive domestic and international track record," Dietmar Kuhnt, chairman of RWE's management board, said in a statement. "I am pleased to say we already bought 20 percent of Thames's shares this morning to cement this transaction."
Bill Alexander, chief executive of Thames Water, will run the combined company's water businesses.
International expansion
Thames Water has been expanding rapidly outside the U.K. in the past two years as the regulator of the British water industry cut the prices that companies could charge domestic consumers. London-based Thames now operates in Australia, China, Indonesia, Puerto Rico, Thailand and Turkey, as well as the U.S. and U.K.
Shares of Thames Water (TW-) rose 54 pence, or 4.7 percent, to 1,212 pence after the announcement. RWE (FRWE) trickled down 2.8 percent to  39.60 in midday trading in Frankfurt.
 Shareholders of Thames Water as at Oct. 6 will be eligible for an interim dividend of 20 pence per share, in addition to the 32.7 pence a share dividend due at the end of the most recent fiscal year, on March 31.
RWE will assume about £1.8 billion in Thames Water debt, with an additional £660 million of debt expected to be added when Thames Water completes its acquisition of New Jersey-based utility E'Town for $948 million.
RWE's total debt after completion of the acquisition will be between 11.1 billion and 11.2 billion (about $9.8 billion), the company said.
The combined business will serve 34 million customers. RWE already has a 22.5 percent stake in Berlin Water Works, the city's municipal water utility.
"This is a growth story. It's not about cost-cutting," said Thames Water CEO Alexander. 
--from staff and wire reports
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