Severn Trent rejects new £5.2bn LongRiver offer

Severn Trent: Second bid rejected. Picture: PA
Severn Trent: Second bid rejected. Picture: PA
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Severn Trent spurned a second takeover approach from an overseas consortium yesterday, saying the £5.2 billion bid again fails to recognise the water company’s value.

The group, which supplies 4.2 million households and customers across the Midlands and parts of Wales, is being courted by the LongRiver consortium, which features Canadian investment group Borealis, the Kuwait Investment Office and Universities Superannuation Scheme.

The latest bid offered 2,079.49p per share plus rights to the latest 45.51p dividend, which LongRiver said offered a 39 per cent premium to the company’s official value as measured by the regulator, minus its debt. However the offer was only 16 per cent higher than Severn’s share price before takeover interest became known.

Borealis chief Michael Rolland said: “LongRiver is surprised and disappointed at the reaction of the Severn Trent board. Our revised proposal is highly deliverable, appropriately financed and would offer certain and compelling value to Severn Trent’s shareholders, recognising its higher cost of debt and long term prospects.”

But Severn Trent chairman Andrew Duff said the offer failed to value its “increasingly rare combination of yield, inflation-linked business model and potential”.

LongRiver has until 11 June to announce plans for a firm offer, or walk away.

Severn is the latest British utility to attract interest after buyouts for rivals Yorkshire Water, Northumbrian Water and Thames Water. That leaves just Severn, United Utilities and Pennon as the remaining water companies on the public markets.

Borealis already co-owns the UK’s biggest ports operator Associated British Ports and the London to Paris High Speed One rail line.