By Kana Inagaki
Japanese trading house Sumitomo Corp. became the latest company to expand in the growing business of water supply, after buying British water supply firm Sutton and East Surrey Water Plc for 164.5 million pounds (US $259 million), excluding debt.
Sumitomo said Tuesday that it bought the U.K. firm from Aqueduct Capital (UK) Ltd., owned by funds advised by iCON Infrastructure LLP, which was spun off from Deutsche Bank in 2011. Other Aqueduct investors include Canada’s Public Sector Pension Investment Board and Alberta Investment Management Corp.
Established in 1862, Sutton and East Surrey Water supplies drinking water to a population of around 655,000 in East Surrey, West Sussex, West Kent, and areas in south London.
The latest deal comes on the back of strong interest in European water and sewerage firms by infrastructure firms and private equity firms, seeking stable cash flows and a favorable regulatory structure. Last year, Rift Acquisitions Ltd., an entity formed by Prudential PLC’s Infracapital Partners and Morgan Stanley Infrastructure Partners , a unit of Morgan Stanley, bought the U.K.-regulated water business of France’s Veolia Environnement SA for 1.24 billion pounds ($1.93 billion) . In 2011, Hong Kong billionaire Li Ka-shing’s Cheung Kong Infrastructure Holdings Ltd. bought U.K.-based Northumbrian Water Group Plc.
With the U.K. water supply firm under its belt, Sumitomo said it is hoping to build up its expertise in water supply so it can expand in other parts of Europe, including Portugal and Spain, as well as the United States. Eventually, it hopes to venture into Southeast Asia where water demand is increasing on the back of the ballooning population and robust economic growth.
“Sumitomo intends to continue its strategy of becoming a major player in water infrastructure,” the company said in a statement.
Last year, the trading house won an order from state-owned Oman Power and Water Procurement Co. to build a desalination plant with Malaysian water and power producer Malakoff Corporation Berhad and Spanish construction firm Cadagua S.A. Sumitomo also has water infrastructure businesses in China and Malaysia.
Aqueduct and its shareholders were advised by Citigroup Global Markets Ltd. while Nomura Securities Co. advised Sumitomo.