* CKI to pay 465 pence/shr
* Northumbrian shareholders will get a 9.57 pence/shr final
* CKI shares hit record high
* Deal in line with Li Ka-shing's strategy
(Adds UBS report, CKI executive comments)
By Farah Master and Adveith Nair
HONG KONG/LONDON, Aug 2 Hong Kong tycoon Li
Ka-shing has agreed to buy British utility Northumbrian Water
Group for 2.4 billion pounds ($3.9 billion) in the
biggest takeover this year of a British-listed company.
Li has been expanding his business empire buying utility
assets in developed countries, especially Britain where
regulations allow for foreign ownership and price controls
ensure a steady and predictable income stream from dividends.
Shares of Li's Cheung Kong Infrastructure Holdings (CKI)
, which is leading the bid for Northumbrian Water, rose
3 percent to a record closing high. The stock has gained about
30 percent so far this year, driven by its acquisition strategy.
Analysts at UBS predicted that CKI and its 39-percent-owned
associate, Power Assets would seize other acquisition
opportunities as cash-strapped investors and governments seek to
cut their debt piles by selling infrastructure assets.
UBS upped its price target on CKI shares to HK$56 from HK$49
following the Northumbrian deal, repeating its "buy" rating.
Li, whose savvy deals earned him the nickname "superman" in
local media, is a high-school drop out who built a plastic
flower business into a global empire that includes
ports-to-telecoms conglomerate Hutchison Whampoa Ltd .
Analysts expect the deal to go ahead given Northumbrian's
board and its biggest shareholder, the Ontario Teachers' Pension
Plan, are backing it. CKI has sold its much smaller Cambridge
Water investment to a division of HSBC to
sidestep any regulatory hurdles.
"With the disposal of Cambridge Water, the main obstacle to
the rapid conclusion of the bid has been removed," Investec
analyst Angelos Anastasiou said. "This ... should be reasonably
positive for the rest of the (UK water companies)."
Shares in peers Severn Trent , Pennon Group
and United Utilities rose as much as 2 percent in London.
The Northumbrian deal would be CKI's third investment in 18
months in the UK, boosting the value of its portfolio of gas,
water and electricity assets there to HK$65 billion from HK$40
CKI has a 4.75 percent stake in Southern Water and last year
agreed to buy the British electricity distribution network (EDN)
of France's EDF for 5.8 billion pounds.
CKI is offering to buy Northumbrian for 465 pence per share.
Northumbrian shares, which closed at 449.4 pence on Monday, were
up 4 percent at 468.6 pence at 1256 GMT. Northumbrian
shareholders will also get a 9.57 pence a share final dividend,
taking the total value of the bid to about 475 pence per share.
"It is a fair deal," said Lorraine Tan, analyst at Standard
& Poor's Equity Research, Asia. "I think the bottom line impact
to CKI holdings won't be as much, as large as the UK power
networks deal. I wouldn't expect the same sort of uptick to its
share price that we saw with that particular deal."
Investec analyst Angelos Anastasiou said UK water companies,
like electricity distribution networks recently sold by EDF and
Germany's E.ON, had regulated price controls in place until
2015, meaning they should attract broadly similar valuations.
"Today's proposed bid level would be in-keeping with these
bid premia," he added.
CKI executives also noted that water tariff increases for
the next 5 years have already been agreed with regulators.
RBC is lead financial adviser and HSBC is financial adviser
to UK Water. Deutsche Bank is acting as exclusive financial
adviser and corporate broker to Northumbrian Water.
CKI said it would contribute 879.5 million pounds to the
Li-controlled consortium buying Northumbrian, funded with
internal resources and a bridge loan of 600 million pounds.
(Additional reporting by Victoria Howley and Lee Chyenyee;
Writing by Paul Hoskins and Charlie Zhu; Editing by Vinu