LongRiver Partners – a consortium comprising Canadian pension Borealis Infrastructure, UK pension Universities Superannuation Scheme and sovereign wealth fund the Kuwait Investment Office – has effectively walked away from the prospect of any further bids for listed UK water utility Severn Trent.
The consortium had until 5pm GMT yesterday to improve upon its 2,200 pence per share offer (2,154.49p plus an already announced 45.51p per share final dividend) or walk away under a “put up or shut up” deadline. The consortium opted not to make a further offer, which would have been its fourth, and is now barred from making an offer for the next six months.
The 2,200p offer valued the target at around £5.3 billion (€6.2 billion; $8.3 billion). LongRiver had previously made an offer of 2,050p on 14 May and then 2,125p on 31 May. Severn Trent said “private conversations” over 6 and 7 June had pushed the amount up to 2,170.51p plus a further 4.49p per share.
In a statement, Severn Trent chairman Andrew Duff said: “We have consistently made clear to the consortium our belief that Severn Trent has a value to our shareholders above the level it indicated it was willing to pay. The difference in value has been at the heart of this process and the Consortium has either not been able, or willing, to bridge that gap.”
However, controversy has surrounded the Severn Trent board’s apparent unwillingness to engage with the bidder. Earlier this week, Borealis president and chief executive Michael Rolland said:
“Since we submitted our [first] proposal on 14 May 2013, no member of the consortium or its advisers have met any of the directors or advisers of Severn Trent or its advisers, despite repeated requests. The Severn Trent Board has shown no interest in discussing our pre-conditional offer with us.”
Rolland’s frustrations may have been shared by some of Severn Trent’s major shareholders. A report in the Telegraph newspaper today claimed that three of the company’s 15 largest investors had said they were “disappointed” at the outcome and expressed surprise at the lack of engagement given what they considered to be only a small gap to an acceptable price.
Severn Trent’s bullishness about its future prospects comes as Ofwat, the UK water industry regulator, has launched a war of words on the sector. Writing in the Telegraph newspaper on Monday, Ofwat chairman Jonson Cox said he would “lift the veil” on UK water companies’ “practices that do not stand the test of public interest” and said the industry should improve its standards or face tougher regulation.