Latest news with #BarbariansattheGate
Yahoo
5 days ago
- Business
- Yahoo
A race against time: what now for Thames Water after rescue deal collapses?
Thames Water came close to collapse this year as it almost ran out of money. But after agreeing to exclusive takeover talks with the US private equity company KKR, the debt-laden utility was hoping for a quieter period as it sorted out the details. Those hopes were extinguished on Tuesday after KKR said it was withdrawing its bid – to the shock of Thames Water and its creditors. It is those creditors, some of whom bought Thames's debt at a big discount in the hope of a quick profit, who have been left – without warning – with the responsibility of pulling together billions of pounds to carry out a turnaround that could take 15 years. Related: Thames Water hit with £123m of fines over sewage and dividend breaches Thames Water has been through a tumultuous year already. It had a close shave with bankruptcy, a high court battle to secure £3bn in emergency investment, and several testy parliamentary hearings. It must invest £20bn over the next five years to fix leaking pipes and water treatment works, all while trying to fend off public anger over sewage in Britain's rivers and seas. KKR balked at the complexity of taking on Thames amid so much scrutiny and with multiple stakeholders in play, according to a person close to the talks. Partners at the private equity firm had carried out 10 weeks of intensive due diligence, including several visits to wastewater treatment works, and had relied on a small army of up to 200 advisers to carry out detailed assessments. The state of some of the Thames assets was worse than KKR had initially thought, according to another source. New York-based KKR, short for Kohlberg, Kravis Roberts, had deployed 15 members of its European infrastructure team, run by the executive Tara Davies, to work on the bid, with James Gordon serving as the lead partner. (Both formerly worked for Macquarie, the Australian investment bank criticised for taking dividends from Thames while building up debt – although they are not thought to have worked on the water company.) Yet over the weekend KKR brought out one of its big guns to try to sweet talk the government: Henry Kravis, one of the co-founders, called up Labour's business adviser Varun Chandra to discuss the plan. Sky News first reported the call. KKR has rarely been shy of potential controversy, ever since its infamous 1988 buyout of the US conglomerate RJR Nabisco was depicted in the book Barbarians at the Gate. However, several people close to the Thames Water situation have said they believed KKR also became concerned about the political risks associated with it, such as the possibility of intense public scrutiny leading to a stricter approach from the government on enforcement. A government spokesperson said: 'The government makes no apology for tackling the poor behaviour we have seen in the past, where too many people were rewarded for failure,' but added: 'We welcome investors who want to work with us to rebuild this vital sector and clean up our rivers, lakes and seas.' Ofwat, the water regulator for England and Wales, last week laid down the gauntlet to KKR with £123m in new penalties mostly related to environmental breaches involving sewage spills. KKR's bid hinged on convincing regulators including Ofwat and the Environment Agency to grant it leniency on fines, penalties and other costs amounting to billions of pounds, as revealed by the Guardian. 'There were always going to be three people in the marriage,' wrote Helen Rodriguez, the head of European special situations at CreditSights, a bond rating agency: Thames Water, KKR and Ofwat. KKR may have been put off by 'the inevitable drip of more fines to come', and decided it was not worth going through a month of meetings in June to try to reach a compromise, she added. Thames Water has hired its own army of advisers, including the law firm Linklaters. It is understood the Linklaters lawyers involved have included Alison Saunders, formerly the UK's director of public prosecutions, and Jonathan Jones, a former head of the government's legal department. Saunders has previously acted for Southern Water on a criminal investigation, while Jones acted for the energy company Bulb during its special administration. Linklaters declined to comment. Keir Starmer's office received a courtesy call from KKR before the announcement. The government is hoping to avoid involvement. The environment secretary, Steve Reed, told parliament on Tuesday there remained 'a market-led solution on the table' as he categorically ruled out a permanent nationalisation. However, Reed acknowledged that the government was ready to put Thames Water into a special administration regime – akin to a temporary nationalisation – if required. Yet the 'market-led solution' leaves the government with the prospect of the UK's biggest water company being owned by a group of creditors that includes US hedge funds – such as Elliott Investment Management and Silver Point Capital – which are known for controversial tactics, as well as big institutional investors such as Aberdeen, BlackRock, Invesco and M&G. It is an unwieldy group of 100 companies, holding £13bn in Thames Water bonds. The investment bank Jefferies is acting as the group's main financial adviser. Despite the financial pressure Thames is under – and the cash burn required to fund its operations – the water company has covered the costs of as much as £15m for due diligence checks that KKR spent on exploring the state of the vast business. Much of that information has already been shared with the creditor group, and will now be used to inform their talks with Ofwat. However, the creditors must race to secure a deal as Thames burns through the first £1.5bn of the emergency cash it borrowed to fund its day-to-day operations. Like KKR before it, the creditor group will also try to reach an accommodation with Ofwat that will reduce the scope for big fines that would threaten to wipe out their financial returns. The new owners would look to install a board with more water industry experience. The position of Thames Water's chief executive, Chris Weston, is unclear. 'The creditors believe that Thames Water requires an urgent and fundamental reset and there is a very short and closing window in which a market-led solution can succeed,' a spokesperson for the lenders said. 'Discussions with Ofwat and the government will be advanced in the coming weeks to reach an agreement and turnaround for the benefit of customers and the environment.' Even if yet another deal on Thames Water can be reached, people involved in the crisis noted the irony of the timing of KKR's decision: it was announced just as an interim government review highlighted 'deep-rooted, systemic' problems in England and Wales's privatised water industry. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Spectator
21-05-2025
- Business
- Spectator
It's time to get rid of the Rich List
Here's a takeover tale that captures the zeitgeist. It involves two FTSE 250 companies and some deep-pocketed US investors – and I'll explain it as simply as I can. In essence, how would you feel if your GP surgery fell into the hands of American investors associated with the book title Barbarians at the Gate? The first of the two London-listed companies is Assura, which owns 600 NHS surgeries and diagnostic facilities and has accepted a cash offer of £1.6 billion from a pair of New York investment giants. They are Stone-peak, which holds a huge global portfolio of infrastructure assets, and Kohlberg Kravis Roberts, whose initials KKR may be familiar to older readers as a pioneer of aggressive private–equity dealmaking – most famously the 1989 buyout (chronicled by Bryan Burrough and John Helyar in the Barbarians bestseller) of the food and tobacco group RJR Nabisco. Imbued with Trumpist swagger, investors like these habitually prowl the London market for undervalued targets. The second company, Primary Health Properties, is the only other significant player in Assura's marketplace, as the owner of 516 GP facilities in the UK and Ireland – and has cut in to offer £1.7 billion for Assura in cash and shares. KKR claims PHP's deal will hit competition issues, though the merged company would hold a relatively small proportion of the NHS surgery estate, most of which is owned by the GPs themselves. In an era in which public markets are shrinking and private equity is rampant, largely to the detriment of smaller investors, this is a rare example of a listed company challenging the Goliath of KKR and its ilk.
AU Financial Review
11-05-2025
- Business
- AU Financial Review
From barbarians to Taylor Swift: PE's push for the masses
Barbarians at the Gate is considered one of the best business books of all time. Published in 1989, it delves deep into the drama of Kohlberg Kravis Roberts & Co's audacious buyout of food and tobacco giant RJR Nabisco, which heralded the birth of private equity. The deal and the book immortalised KKR as a power player on Wall Street. Now, 35 years later, the original corporate raider manages $US640 billion ($996 billion) of assets and trades on the New York Stock Exchange with a market capitalisation of $US100 billion.
Bloomberg
23-04-2025
- Business
- Bloomberg
Empaths at the Gate: KKR and a Stanford Psychologist Measure People Skills
In 2011, KKR & Co. bought an industrial company in Minnesota and did something unusual for a private equity firm—it invited factory workers to share ownership. A key plant with a major morale problem was losing employees and had a sky-high accident rate. Giving workers an equity stake, the thinking went, would increase loyalty, engagement and performance. The results were promising enough that KKR began issuing equity stakes to workers at other companies it owned, at first mainly in the manufacturing sector, where annual turnover rates are routinely above 40%. KKR, which manages $600 billion in assets firmwide, is most famous for leveraged buyouts, such as in the bare-knuckle battle for control of RJR Nabisco chronicled in Bryan Burrough and John Helyar's 1989 bestseller, Barbarians at the Gate. But it has an interest in the management of a vast private equity portfolio of 250 companies with a combined total of more than 850,000 employees. Today its employee ownership model is in place at more than 65 of those companies, including publishing giant Simon & Schuster LLC, and the firm's private equity business in the Americas is now pledging to bring the setup to every deal in which it buys a controlling stake.
The Guardian
31-03-2025
- Business
- The Guardian
Thames Water names US private equity group KKR as ‘preferred partner'
Thames Water has picked the US investment firm KKR to take a stake in the business, as the embattled water company fights to stave off nationalisation. The UK's biggest water supplier, which is struggling under a debt pile of close to £20bn, said it had selected KKR as a 'preferred partner' as it seeks to secure fresh equity funding for its operations by the end of June. The New York-based private equity firm is expected to acquire a stake in Thames worth £4bn. The UK-based business water retailer Castle, with more than 250,000 customers, had also put in a bid for £4bn, Bloomberg News reported last week. Hong Kong-based CK Infrastructure Holdings, part of CK Hutchison, and London-based investment firm Covalis Capital were also among the bidders. Thames's chief financial officer had quit on Friday. Alastair Cochran, who had also recently served as interim co-chief executive at Thames, is leaving at a critical time, after Thames agreed to take on billions more debt from its creditors after a court ruling earlier this month. Thames, which serves 16 million customers in London and south-east England, said: 'The company remains focused on putting Thames Water on a more stable financial foundation, implementing its turnaround plan and delivering a market-led solution that is in the best interests of customers, UK taxpayers and the wider economy.' It expects to agree a deal with KKR – the private equity group that inspired the story of corporate greed, Barbarians at the Gate – by the end of June, and complete it in the second half of the year. It means that senior bondholders will take a hefty haircut on their loans, as expected. KKR's proposal will lead to a 'material impairment' of the company's class A debt and discussions continue in relation to other aspects of the proposal, Thames added. Most of the bidders were seeking reassurance that they would be able to avoid or manage future fines and punishments for poor performance. Two weeks ago, Thames won approval from the court of appeal for a £3bn emergency debt bailout from its existing creditors to avoid an immediate collapse into a special administration regime, a form of temporary nationalisation. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion The company's future has been under intense scrutiny and there are concerns over the state of its ageing assets, which were the subject of a recent BBC documentary.
