Severn Trent board turns down revised bid from LongRiver Partners

03 Jun 2013


The board of UK water utility, Severn Trent has turned down a revised bid from LongRiver Partners as it 'did not reflect the firm's long-term value'.

It rejected a £4.96 billion revised bid from a consortium of investors on the grounds that the offer failed to recognise the company's long-term future and potential.

The offer worth £21.25 a share from LongRiver Partners, a consortium including Canada's Borealis Infrastructure Management, the Kuwait Investment Office and UK pension fund the Universities Superannuation Scheme, was unanimously rejected by the board.

Severn Trent, supplier of water and sewerage services to 4.2 million businesses and households in the Midlands and Wales, rejected an initial proposal last month.

It said today, the revised offer assumed that a final dividend of 45.51p a share already announced for the year to 31 March was not paid to shareholders. With the payment of final dividend the offer would value each ordinary share at £20.79p, valuing Severn at £4.96 billion according to the company.

According to the company, the offer representing a premium of 16 per cent to Severn's share price the day before the announcement of LongRiver's interest, failed to reflect the significant long-term value of Severn Trent or to recognise its future potential.

The company had last month rejected an initial $7.2 billion approach from the consortium, which was believed to be worth just under £20 per share, representing a premium of 10 per cent premium above the closing price of the stock at £18.25 before the announcement of the approach.

According to analysts, yield-hungry investors had been showing strong interest in British water and sewerage firms as they sought cash flows as also a favourable regulatory structure.

Seven of the 10 UK water companies were now in the hands of private investors, with Pennon Group, United Utilities and Severn Trent the remaining three listed entities.

Shares in Severn Trent were trading up 0.1 per cent at 2,054 pence, below the level of the revised bid after the rejection.

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