Corsair pulls Kelda sale as DWS continues talks

09 November 2018 - 12:00 am UTC

Corsair Capital is no longer pursuing the sale of its 30% stake in Kelda Water after some 18 months of negotiations, as it also struggles to sell its three other assets within its Gateway Infrastructure Fund, Inframation has learnt.

The New York-based manager founded by Citigroup has been running a joint process with DWS to sell their combined majority stake in Kelda Water. DWS, which owns a 23.4% stake, is believed to be continuing the sale of its stake.

Both managers are believed to have struggled to secure a deal with a large investor willing to pay a sufficiently high premium to RAB for the stake in the water company, which has a price tag of around GBP 2bn.

The planned reductions in allowed returns at the next water price review starting next year, along with potential fallout from Brexit, may have put off such large investors from placing such a large bet on UK water. Blackstone withdrew from the bidding process several weeks ago, while PSP, originally a keen buyer, is understood to be having second thoughts.

However, the timing of Corsair’s withdrawal is understood to coincide with growing interest in Kelda by a number of groups of smaller investors, believed to include UK pension funds as well as some Asian investors.

These investors are understood to be typically looking to each invest around GBP 200m-300m, a well-placed source said.

Given this interest, it is unclear exactly why Corsair, whose Gateway Infrastructure Fund owns the Kelda stake, should withdraw at this stage. Insiders, however, linked the move to claims that the manager is struggling to sell Gateway’s stakes in its three other investments, the Spanish toll road operator Itinere, Vantage Airports Group in the US, and DP World Australia.  

One source close to the process said: “Corsair has decided to hold onto its stake in Kelda. The process in relation to Itinere and the other sales have taken too much of their resource. They have not been able to dedicate the necessary time to the Kelda process, which has caused some frustration.”

Corsair, advised by Credit Suisse’s New York, London and Hong Kong offices, has been trying to sell the three stakes in a process codenamed Project Tango since December last year. Its plan is for buyers to acquire some or all of the assets, and that Corsair will continue managing the assets post-sale. Existing Gateway LPs can either sell out altogether, roll their exposure to the new fund, or increase their exposure in the so-called ‘continuation process’. 



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