Macquarie is poking around in murky British waters. The Australian bank’s infrastructure management arm has bought a majority stake in Southern Water for £1 bn as part of a recapitalisation that will dilute existing owners, including UBS Asset Management and Hermes Investment Group.
The company, which serves the counties of Kent, Sussex and Hampshire, recently paid a £90 m penalty, the sector’s biggest, for dumping sewage in rivers and off coasts. Macquarie is pledging to cut Southern’s debt, beef up governance, invest in new infrastructure and adopt a “zero tolerance” policy to pollution.
Macquarie is not paying a steep price, but it probably faces a long wait for a decent return.