Hands in £453m offer for utility

VENTURE capitalist Guy Hands emerged as the £453m buyer of East Surrey Holdings - but it appears likely the company's Sutton and East Surrey Water will come back on to the market.

Hands' £2bn Terra Firma venture fund said today its Kellen Acquisitions bid vehicle was behind the 535p a share bid for East Surrey, made up of 525p a share in cash plus the 10p final dividend shareholders had been expecting.

In the past two years Terra Firma has spent £750m on buying waste businesses.

'East Surrey fits perfectly with our investment strategy of targeting asset-intensive businesses with strong and reliable cashflows operating in basic service industries,'Hands said today.

But it emerged that what Hands is really after is East Surrey's growing Phoenix gas supply business in Belfast.

This has a regulated asset value of £300m and under the terms of its licence is allowed a pre-tax return of 8.5% a year until 2016. Though Sutton & East Surrey Water makes £10m a year, it is highly regulated and is obliged to invest heavily.

East Surrey's directors, speaking for less than 1% of the company, have recommended the deal.