Water groups likely to see improved bids

Foreign and British bidders are poised to return with a higher offer for water group Severn Trent, while overseas investors are also jostling to buy a stake in Yorkshire Water owner Kelda.

A consortium of bidders led by Canadian infrastructure investment group Borealis is likely to make a bid of around £5 billion for Severn before an 11 June deadline, according to reports yesterday. Severn supplies 4.2 million households and businesses across the Midlands and parts of Wales.

Meanwhile, it is thought that international suitors including Abu Dhabi’s sovereign wealth arm are considering buying a 30 per cent stake in Yorkshire Water for between £1bn and £1.5bn. It has been put up for sale by its private equity and fund owners.

Severn rejected an undisclosed offer from Borealis, the Kuwait Investment Office and Universities Superannuation Scheme earlier this month as significantly undervaluing the group. But the consortium is reportedly poised to return with a bid of around 2,000p to 2,100p, valuing it at just under £5bn, ahead of a Takeover Panel deadline.

The report added the consortium will not go hostile with its bid if Severn’s board again rejects the offer.

Severn said earlier this month: “The board has reviewed the proposal with its advisers and concluded that it completely fails to recognise the existing and potential value of Severn Trent.”

It added the bid offered “only a modest premium” to its share price prior to takeover interest becoming known.