Severn Trent rejects third offer

The UK water company has once again said the LongRiver consortium of institutional investors is guilty of an under-valuation.

Late on Friday last week, the LongRiver consortium – comprising Canada’s Borealis, the Kuwait Investment Authority and the UK’s Universities Superannuation Scheme – had a third offer for UK water company Severn Trent turned down.

The offer – described as a “pre-conditional, possible” offer – was pitched at 2,200p per ordinary share, which Severn Trent said was an increase of only 3.5 percent on its previously announced conditional proposal.

The latest proposal values the firm, which serves 7.7 million customers in central and western England and Wales, at around £5.2 billion (€6.1 billion; $8.1 billion).

Amid reports that the bidding consortium has grown increasingly frustrated by a lack of engagement from the Severn Trent board, Borealis president and chief executive Michael Rolland said in a statement:

“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.”

He added: “The Severn Trent Board has shown no interest in discussing our pre-conditional offer with us. In the absence of any such engagement, there will be no further proposal from the consortium and no offer for Severn Trent shareholders to consider.”

Rolland’s words would appear to lower the likelihood that the consortium will come back with a formal offer ahead of Tuesday’s 5pm ‘put up or shut up’ deadline. If no offer is made by then, the consortium effectively walks away from any possible deal.

In a Severn Trent statement, the company’s chairman Andrew Duff said:

“The Severn Trent Board has carefully considered this proposal. The Board unanimously believes that this proposal is not at a level that adequately compensates our existing shareholders for selling Severn Trent’s increasingly rare combination of yield, inflation-linked business model and record of operational delivery for customers.”