British water firm Severn Trent rejects $8.2 bn revised bid by consortium

A third revised $8.2-billion (£5.3 billion) takeover bid made over the weekend by a consortium of Canadian and Kuwaiti investors for Severn Trent has been immediately rejected by the board of the British water firm saying that it did not reflect the company's long-term value.

The LongRiver Partners consortium, comprising of Kuwait sovereign wealth fund Kuwait Investment Authority, Britain's Universities Superannuation Scheme and Borealis Infrastructure, part of Canadian pension fund OMERS, had tabled a revised bid of £22-a-share in cash.

The offer is 3.5-per cent more than the £21.25 a share bid that was made last week by the LongRiver Partners consortium and rejected by the board of Severn Trent, a supplier of water and sewerage services to 4.2 million businesses and households in the Midlands and Wales. (See: Severn Trent board turns down revised bid from LongRiver Partners)

Severn Trent, the UK's second-largest publicly traded water company, issued a statement saying that the sweetened bid "continues to fail to reflect the significant long term value of Severn Trent or recognise its future potential".

The company had rejected an initial $7.2-billion approach from the consortium last month, 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 UK takeover rules, the consortium has until 11 June to table a formal bid or walk away for six months.

The Sunday Times said the consortium was considering options, including making another offer, while the Sunday Telegraph reported that the consortium was frustrated and may abandon the deal.

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 closed on Friday at £20.70, below the revised £22-a-share bid.