Osmond opens battle with Aggreko after £168m move

Published on Sunday 12 June 2011 19:20

SHARES in Glasgow-based temporary power supplier Aggreko dropped by 3 per cent yesterday after Punch Taverns founder Hugh Osmond pumped more than £168 million into its biggest rival.

Horizon, Osmond's London-listed investment vehicle, snapped up Florida-based APR Energy, the second-largest firm of its kind after Aggreko, in a deal worth 527m.

The acquisition paves the way for a head-to-head clash between Osmond, who also founded Pizza Express, and Rupert Soames, the chief executive who has steered Aggreko into the FTSE 100.

Analysts at stockbroker Numis, which is advising Horizon, warned that the deal "could herald a significant increase in competition" for the Scottish company and cut its recommendation on Aggreko from "hold" to "sell".

APR - whose shareholders include billionaire George Soros and former US secretary of state Madeleine Albright - will be floated in London as part of the deal, which will see 168m of cash left on its balance sheet to fuel expansion.

Aggreko yesterday declined to comment on the deal.

Turnover at APR has more than tripled since 2007 to about $126m - or 77m - last year.

But the figure is dwarfed by Aggreko's revenues for 2010, which rose by 19.7 per cent to top 1.15 billion.

APR competes with Aggreko's international power projects division, which accounted for $711.5m of the Scottish group's turnover in 2010.

Both companies received a boost after March's earthquake and tsunami in Japan, with both winning contracts from Japanese utility company Tepco.

Horizon chairman Mike Fairey said: "The acquisition is at an attractive price relative to its quoted peer, the injection of our cash accelerates APR's ability to grow and its stock market listing will enhance its reputation and provide further access to growth capital if required."

Shares in Horizon, which stood at 950p on Friday, have been suspended. Horizon will be renamed as APR Energy and is expected to be re-admitted to the stock exchange before the end of September.

Following the deal, Horizon shareholders will own 59 per cent of APR Energy and APR's existing management will own about 12 per cent.

Soros Fund Management and Albright Capital Management are rolling the majority of their investment into Horizon shares and will own about 14 per cent and 13 per cent respectively of Horizon's share capital.Albright and Soros put about $250m into APR in March to fund expansion in Africa and South America.

Numis analyst Mike Murphy said: "APR was financially-constrained before the investment by Soros and Albright funds earlier this year.

"Following their investment, it has grown strongly and, post Horizon's announcement, it will have substantial resources for investment as a quoted group."

Aggreko was spun out of transport conglomerate Salvesen Group in 1997, while APR was created in 2004 through a management buy-out from Alstom Power by John Campion and Laurence Anderson.