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Severn Trent has agreed to sell its global water purification business valued at $99 million (£61.9 million) to its joint venture partner Industrie de Nora.
A statement from the company said the deal will see the group’s £50.8 million share settled through a cash payment of £12.6 million and the settlement of net intercompany debt.
Investors said the sale price is consistent with consensus valuations, despite previous financial difficulties.
“Water purification was loss-making in 2013/14 but we were assuming a recovery from 2014/15 onwards,” said utilities analysts at Citigroup.
Severn Trent chief executive Liv Garfield said that over the past 18 months a number of improvements have been made to the arm, which contributes a third of earnings from Severn Trent’s Services segment, including improving sales processes and contract management.
“The business is now on a more stable footing and growing both the top and bottom line. However, it’s clear that in order for the business to fulfil its growth potential it needs manufacturing and product expertise and focus so it’s the right time for it to have a new owner,” Garfield said.
Citi analysts added that the sale should further simplify Severn Trent and focus the earnings on the regulated business. RBC Capital added that it will also enable a greater focus on other non-regulated businesses such as operating services in the UK, Ireland, Italy and the US as well as renewable energy.
Garfield confirmed Severn Trent’s plans to focus on core water and waste water service businesses in the UK and abroad.
The sale is expected to complete on or around 30 June 2015.
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