Goldman Sachs, JPMorgan Submit Southern Water Bids, People Say

By Ambereen Choudhury and Nicholas Larkin

Oct. 8 (Bloomberg) -- Goldman Sachs Group Inc. and partners including Babcock & Brown Ltd. submitted final bids for Southern Water Plc, vying with a group led by JPMorgan Chase & Co., said people familiar with the proposals.

The offers, each about 4 billion pounds ($8.1 billion), were due today, said the people, who declined to be identified because the bidding is confidential. A winning proposal may be picked as soon as tomorrow and a final agreement may be reached next week, they said.

Investment banks, buyout firms and pension funds are competing for assets such as water companies, toll roads and airports because they offer a steady flow of earnings. A group led by Macquarie Bank Ltd., Australia's biggest investment bank, bought Thames Water Utilities and its 8 million users last year for 4.8 billion pounds.

``You're buying something that's inflation proof and there's no threat to earnings really,'' Verity Mitchell, a London-based analyst at HSBC Securities, said by telephone today. ``It's very stable and you can sell it any time you want.''

Goldman, based in New York, along with funds managed by Babcock & Brown, Prudential Plc and Deutsche Bank AG's RREEF unit are part of one bidding group, the people said.

New York-based JPMorgan's asset management unit is bidding with an infrastructure fund managed by Australia's Challenger Financial Services Group and other Australian funds, the people said. Macquarie is advising this partnership.

Water Services

Paul Kafka, a spokesman for Goldman in London, declined to comment, as did Emma Collins, a spokeswoman for JPMorgan Asset Management in London. Bob Thian, chairman of the Worthing, U.K.- based-utility, declined to comment, as did Dominic Fry, a representative for Southern Water and its owner, Royal Bank of Scotland Group Plc.

Southern Water, which has about 2,000 workers, provides water to about 1 million households in Southeast England, according to its Web site. It also treats dirty and recycled water from 2 million homes, the site showed.

Royal Bank and partners today won control of ABN Amro Holding NV, the biggest Dutch bank, after its shareholders backed a buyout bid valued at 71.9 billion euros ($101 billion).

Royal Bank's private equity unit controls Southern Water, along with other U.S.-based hedge funds.

``It's a regulated business with a perception that there's stable cash flows,'' Mark Freshney, a London-based analyst at Credit Suisse Group, said by telephone. ``If you buy it, you're in it for the long-term view.''

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net ; Nicholas Larkin in London at nlarkin1@bloomberg.net

Last Updated: October 8, 2007 13:46 EDT