Foreign investors up Severn Trent bid to £5.3bn

Foreign investors up Severn Trent bid to £5.3bn

The offer comes after Severn Trent rejected a £21.25 approach on Monday, insisting it “fails to reflect the significant long term value” of the company or to “recognise its future potential”.

In a statement on behalf of the LongRiver consortium, Michael Rolland, President of Canadian infrastructure fund Borealis, said: “LongRiver’s proposal of 2,200 pence per share in cash represents certain and compelling value for Severn Trent shareholders.

The offer is also conditional on due diligence being conducted by the consortium, which is comprised of Borealis, the Kuwaiti Investment Office and the Universities Superannuation Scheme.

The water utility, which supplies about 4m households across the Midlands and Wales, has debt valued at between £4.3bn and £5.1bn, putting the total value of the approach at about £10bn.

LongRiver said the offer represented a 31pc premium to Severn Trent’s regulatory capital value of £7.4bn, using the book value of Severn’s debt, of £4.3bn.

That would exceed the premia at which other water utilities have been taken private.

Using the higher value of Severn’s debt, of £5.1bn, the offer implies a premium of 41pc, LongRiver said.

The consortium had said on Monday it was “surprised and disappointed” at Severn Trent’s decision to reject its initial offer and it is understood there have been no talks between the two sides since.

In rejecting the lower offer on Monday, Severn insisted the it was really worth only £20.79½ because it assumed its previously-announced 45.51p a share final dividend was not paid to shareholders.

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