Former chief ready to bid for Mid-Kent

UTILITY group Mid-Kent Water has been put up for sale by its owner, German bank WestLB. Its former chief executive Keith Tozzi, who runs small quoted investment company Augean, has emerged as a front-runner to buy the company.

Mid-Kent has assets of £200m but also has debt. It was supposed to spearhead WestLB banker Robin Saunders' plans for a utilities empire when she bought it in 2001 for £106m, but no further deals followed.

Tozzi helped seal the deal with WestLB, but was forced out of the company, despite his extensive experience in the water industry. He was replaced by Neil McDougall, who has also gone.

Tozzi left last year when WestLB first decided to sell Mid-Kent after a change in strategy, but that first deal collapsed.

He is now executive director of Augean, a cash shell that recently floated on the Alternative Investment Market with the aim of investing in waste and water companies. On Friday, it announced the proposed acquisition of two waste businesses - Atlantic and Zero - for a combined £106m, alongside plans to raise £100m through a share placing.

Augean could face stiff competition for Mid-Kent because the steady returns offered by utilities have attracted financial and overseas trade buyers to the sector.

One indication of the appetite for water investments came with the recent sale of South Staffordshire, another pure water business. It sold to First Islamic Bank for £143m, a 27% premium on its share price before the bid.

Another reason for increased interest in the sector is that industry regulator Ofwat is to issue its final price determination for the next five years on December 2.

This process sets investment limits on water companies' networks and therefore the amount by which they can increase customers' bills.

The ideal time to buy a water company is at the beginning of a new fiveyear regulatory period.

WestLB decided to sell following a long review of investments made by Saunders, who left the bank last year.

The Odeon cinema chain was one of the largest investments. It was sold to Guy Hands' Terra Firma fund for about £400m. He bought the UCI chain at the same time, giving him a near 40% share of the UK's cinema industry.