The family-owned company has extended its domestic footprint. Where will the growth come from?
The water subsidiary of German family- owned waste disposal and water group Remondis is to acquire 100% of Eurawasser from Suez Environnement for €95 million.
The deal – which should be completed in Q1 2012 – values the company at 1.4 times annual revenues of €70 million (although Eurawasser’s own website claims an annual turnover of €120 million), and 14.6 times the division’s 2010 net result of €6.5 million. The last meaningful external valuation of the unit was in 2002, when ThyssenKrupp sold its 50% stake to Suez’s Ondeo Services division for €38 million, or the equivalent of just over 1.0 times 2001 revenues.
Eurawasser serves more than 800,000 people in several eastern German cities, as well as the Rheingau region in the west of Germany. It manages water and sanitation concessions, management and maintenance contracts, and has interests in a number of public-private companies.
“Taking Eurawasser on board will extend and sustainably strengthen our business in Germany,” Remondis Aqua spokesman Michael Schneider told GWI. “We definitely see considerable growth potential.” Nevertheless, it remains to be seen whether Eurawasser will succeed in extending existing contracts with municipalities when these expire.
“The perceived new enthusiasm for recommunalisation should not be overdramatised,” commented Eric Heymann, a water analyst at Deutsche Bank Research. “In the wake of the financial crisis, the idea of assuming more responsibility is being considered by many municipal governments. This is unlikely to happen to a large extent, however,” he indicated to GWI.
“It really boils down to competitiveness and efficiency,” Schneider emphasised to GWI. “Provided there is a fair tender and all market participants have an equal chance of winning back the contracts in question, we are convinced that we can deliver the best and most efficient services for a competitive price that will help municipalities to keep water charges low. Since most municipalities in Germany are suffering from considerable budget deficits, the privatisation of the water sector can and should be part of the solution to tackle that problem.”