The Boards of Hanover Bidco and Hydro International have jointly announced that they have reached agreement on the terms of a recommended acquisition in a deal which values Hydro at about £28 million.

Hanover Bidco is a wholly owned indirect subsidiary of the Hanover Active Equity Fund LP - the Hanover Bidco Group and its other parties currently own Hydro Shares representing approximately 17.7 per cent. of the issued ordinary share capital of Hydro.

The acquisition values the entire issued share capital of Hydro at approximately £28 million.

The announcement says that the Hydro Board considers the terms of the acquisition to be fair and reasonable and in the best interests of shareholders.

The Board now intends unanimously to recommend that shareholders vote in favour of the resolutions to be proposed at a court meeting and a general meeting convened to approve the acquisition which will take place shortly.

Tony Hollox, the only Hydro Director who holds Hydro shares representing approximately 0.2 per cent. of Hydro’s issued share capital, has irrevocably undertaken to vote in favour of the resolutions. In addition, Hanover Bidco has received irrevocable undertakings to vote in favour of the resolutions from  a number of other Hydro shareholders who own approximately 37.1 per cent. of the issued share capital.

Commenting on the acquisition, Ian Griffiths, Chairman of Hydro said:

"Whilst Hydro is well placed to continue to deliver on its stated strategy, the proposed acquisition by Hanover announced today will enable shareholders to crystallise an immediate and certain value in cash. It represents a significant premium to historic share price trading levels and the Board of Hydro has unanimously recommended Hanover’s offer."

Hydro - "great company with significant potential ... which would fare better as a private company"

Matthew Peacock, founding partner of Hanover Investors and a director of Hanover Bidco added:

"We are delighted to be announcing this recommended cash offer for Hydro. We believe that Hydro is a great company with significant potential, but that given its size it would fare better as a private company. Our proposal provides Hydro Shareholders with an opportunity to realise a significant premium over the value of their shares prior to Hanover Investors acquiring a stake in the company."

Setting out the background to and reasons for the acquisition, Hanover Investors said that while it is confident in the long term prospects for Hydro and the water services sector, it believed that “as a relatively small UK quoted company, Hydro will find it difficult to obtain the necessary investment to grow successfully and to increase stock liquidity.”

Hanover Investors said it intends to seek to continue to grow Hydro's customer base and contracted revenue base, whilst ensuring control of costs and eliminating the expense associated with a UK public listing.

Hanover Bidco is a newly incorporated company formed on 10 May 2016 at the direction of Hanover for the purpose of implementing the acquisition. 

Hydro is a global supplier of environmentally sustainable products and innovative solutions for the control and treatment of stormwater, wastewater and combined sewer overflows. The firm has developed a range of technologies to control urban runoff and treat stormwater,combined sewage  overflows and municipal wastewater with the aim of providing cost-effective solutions for controlling quantity and improving quality of water.

In its wastewater division, Hydro provides technologies and supporting services to municipal and industrial customers in applications including screening, grit removal, and primary, secondary and tertiary treatment of water and wastewater. Where necessary third party products are also supplied alongside Hydro’s proprietary products. Major customers include the water utility companies in the UK and municipal wastewater plant owners and operators across North America.

In stormwater, Hydro provides low-energy solutions for the control of stormwater flows and the removal of pollutants from these flows for application in urban drainage systems. Market demand is created largely by regulation governing the requirements for stormwater management in new-build construction, although retro-fit applications to solve existing problems such as flooding or stormwater pollution are becoming increasingly important. End customers are typically accessed through a range of distribution partners operating in the wider construction market.

Headquartered and with offices in the UK, Hydro also operates from offices in Ireland, USA, Dubai, Singapore and China.

For the year ended 31 December 2015, Hydro reported revenue of £37.9 million and adjusted profit before tax of £2.4 million.