A group of investors leading a rescue bid for Thames Water is reportedly preparing to launch legal proceedings against Andy Burnham's incoming government if their takeover proposal is rejected in favour of nationalisation. The London & Valley Water (L&VW) consortium, which holds a significant portion of the utility's debt, has appointed Pallas Partners, an elite litigation and disputes firm, to act on their behalf should the government block their offer.
Consortium's legal preparations
Pallas Partners will work alongside L&VW's current legal advisors, Akin Gump, according to Sky News. A source close to the consortium emphasised that litigation would be a last resort, stating, "There is no legal action being taken right now. This is purely precautionary." The consortium aims to reassure Whitehall officials about any concerns over the proposed deal.
L&VW comprises fund managers including Apollo Global Management, Elliott Management, Farallon Capital Management, and Silver Point Capital. These investors have seized £17 billion of Thames Water's £21 billion debt mountain. The group is pushing for a £10 billion takeover to prevent the company from being placed into a special administration regime (SAR), a form of temporary public ownership.
Political concerns over nationalisation
The consortium fears that Burnham's arrival in Downing Street could scupper the deal, given his past statements advocating for "public control" of water companies. Last month, Burnham said, "I would say for Thames Water, that [greater public ownership] is what should be done." Thames Water's annual results last week sparked renewed backlash after revealing that chief executive Chris Weston's pay had risen to £1.6 million despite the company's financial woes.
The takeover bid would inject £3.35 billion of new equity into Thames Water, alongside £6.25 billion of new debt, while writing off £9.6 billion of the company's existing debt. Environment secretary Emma Reynolds cast doubt on the recovery plan last month, writing to regulator Ofwat to express concerns about its terms. She stated, "I am not yet convinced that the Proposal demonstrates sufficient protection for consumers' interests. I am concerned that consumers will ultimately bear an undue cost for these adjustments."
Regulatory and political dynamics
It remains unclear whether Reynolds will stay on as environment secretary in Burnham's new cabinet, but the L&VW consortium reportedly expects the new administration to take a harder line on the deal. Ofwat chair Iain Coucher wrote to Reynolds this week confirming that a fresh proposal was being developed. He said, "We will consider any such revised proposal, if requested to do so by the company's board, in accordance with our statutory duties, including to ensure that the interests of customers are adequately protected."
The outcome of the takeover bid could have significant implications for Thames Water's 15 million customers and the broader water industry. If nationalisation proceeds, it would mark a major shift in UK water policy under Burnham's government.
