Severn Trent deal dead in the water as suitor threatens to pull out
A FOREIGN consortium bidding to take over Midland-based utility Severn Trent could be on the verge of pulling out of the deal after its latest £5.3bn offer for the company was rejected by its board.
Press reports have suggested that LongRiver Partners – a consortium led by Borealis Infrastructure Management Inc, and including the Kuwait Investment Office and Universities Superannuation Scheme – is upset by the speed of which its latest offer on Friday was dismissed and by the Severn Trent board’s reluctance to enter into talks.
A statement by the partnership appears to confirm its position.
The partnership’s latest bid was based on an offer of £22 a share, which represented a 41% premium to the utility’s regulatory capital value at the end of March.
However, within seven hours of the bid being submitted, the Severn Trent board had rejected the offer – the third time it has done so.
Severn Trent said the proposal represents an increase of only 3.5% on LongRiver’s previously announced offer and was a premium of only 20.5% to Severn Trent’s share price the day before the announcement of LongRiver’s interest in the business.
Andrew Duff, Severn Trent chairman, said: “Throughout this process the board has been careful to act in the best interest of shareholders. We have held private conversations with LongRiver and made clear that we have no objections to fuller discussions in the event that LongRiver puts forward a proposal which properly reflects the long term value and future potential of Severn Trent.
“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.”
However, this version of events appears to conflict with LongRiver’s interpretation.
Commenting on behalf of the consortium, Michael Rolland, president and CEO of Borealis, said: “Since we submitted our proposal on May 14, 2013, no member of the consortium or its advisers has met any of the directors 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. 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.”
