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| Consortium ups offer for Severn Trent to £5.3bn | Consortium ups offer for Severn Trent to £5.3bn |
| (4 months later) | |
| A consortium of financial investors have refused to give up their courtship of Severn Trent and have offered an improved £5.3bn to take the FTSE 100 water firm private. | A consortium of financial investors have refused to give up their courtship of Severn Trent and have offered an improved £5.3bn to take the FTSE 100 water firm private. |
| The trio of investment funds upped their bid by 75p to £22 a share after Severn rejected a £4.96bn approach on Monday. Its board convened a meeting to discuss the offer, which the suitors described as a "full and fair" bid for a firm that provides water and sewerage services to 4.2m homes and businesses in the Midlands and mid-Wales. | The trio of investment funds upped their bid by 75p to £22 a share after Severn rejected a £4.96bn approach on Monday. Its board convened a meeting to discuss the offer, which the suitors described as a "full and fair" bid for a firm that provides water and sewerage services to 4.2m homes and businesses in the Midlands and mid-Wales. |
| One of the members of the LongRiver consortium urged the board to back the new offer. "LongRiver's proposal of £22 a share in cash represents certain and compelling value for Severn Trent shareholders," said Michael Rolland, chief executive of consortium member Borealis, a Canadian infrastructure fund. "We look forward to engaging with the Severn Trent board to enable us to make our formal offer to Severn Trent shareholders. Without engagement there can be no offer from the consortium." | One of the members of the LongRiver consortium urged the board to back the new offer. "LongRiver's proposal of £22 a share in cash represents certain and compelling value for Severn Trent shareholders," said Michael Rolland, chief executive of consortium member Borealis, a Canadian infrastructure fund. "We look forward to engaging with the Severn Trent board to enable us to make our formal offer to Severn Trent shareholders. Without engagement there can be no offer from the consortium." |
| LongRiver said its improved bid represented a premium of 21% to the price at which shares in Severn Trent were trading before news of takeover interest emerged last month. The other consortium members are Kuwait Investment Authority, a sovereign wealth fund, and Britain's University Superannuation Scheme (USS). | LongRiver said its improved bid represented a premium of 21% to the price at which shares in Severn Trent were trading before news of takeover interest emerged last month. The other consortium members are Kuwait Investment Authority, a sovereign wealth fund, and Britain's University Superannuation Scheme (USS). |
| The offer price has been made conditional on the consortium receiving greater access to Severn Trent books and winning the backing of its chairman, Andrew Duff, and his board. Headway must be made on reaching such an agreement before 5pm on Tuesday – the Takeover Panel's deadline for an offer. If no progress is made, LongRiver will be barred from returning with fresh terms for six months under the panel's "put up or shut up" rules. | The offer price has been made conditional on the consortium receiving greater access to Severn Trent books and winning the backing of its chairman, Andrew Duff, and his board. Headway must be made on reaching such an agreement before 5pm on Tuesday – the Takeover Panel's deadline for an offer. If no progress is made, LongRiver will be barred from returning with fresh terms for six months under the panel's "put up or shut up" rules. |
| Duff said the previous LongRiver offer this week was dismissed as it did not take into account Severn's unique attributes. "[It] fails to value the attractions to Severn Trent's shareholders of [our] increasingly rare combination of yield, inflation-linked business model and potential," he said. | Duff said the previous LongRiver offer this week was dismissed as it did not take into account Severn's unique attributes. "[It] fails to value the attractions to Severn Trent's shareholders of [our] increasingly rare combination of yield, inflation-linked business model and potential," he said. |
| Severn is the latest British utility to attract takeover interest and is one of only three British water utilities that remain listed. The other seven are now in private hands. Kelda Group, the FTSE 100 waterworks firm formerly known as Yorkshire Water, was taken private in 2008 by a consortium including Citigroup Alternative Investments, HSBC, the Prudential and GIC, a Singapore sovereign fund. In 2006 Thames Water was acquired by a consortium led by Australian infrastructure specialists Macquarie Group. | Severn is the latest British utility to attract takeover interest and is one of only three British water utilities that remain listed. The other seven are now in private hands. Kelda Group, the FTSE 100 waterworks firm formerly known as Yorkshire Water, was taken private in 2008 by a consortium including Citigroup Alternative Investments, HSBC, the Prudential and GIC, a Singapore sovereign fund. In 2006 Thames Water was acquired by a consortium led by Australian infrastructure specialists Macquarie Group. |
| Northumbrian Water was acquired almost two years ago by Chinese infrastructure investor Cheung Kong, which has investments in China, Australia, Canada and the Philippines as well as the UK. | Northumbrian Water was acquired almost two years ago by Chinese infrastructure investor Cheung Kong, which has investments in China, Australia, Canada and the Philippines as well as the UK. |
| A spokesman for Severn Trent could not be reached for comment on LongRiver's new proposal. The firm has previously stressed its achievements and prospects as justification for spurning previous proposals. Severn points to a 72% total shareholder return since April 2010. Since the business was privatised in 1990, it added, the group's regulatory capital value has expanded from £865m to £7.36bn. | A spokesman for Severn Trent could not be reached for comment on LongRiver's new proposal. The firm has previously stressed its achievements and prospects as justification for spurning previous proposals. Severn points to a 72% total shareholder return since April 2010. Since the business was privatised in 1990, it added, the group's regulatory capital value has expanded from £865m to £7.36bn. |
| Shares in Severn Trent last night closed up 50p, or 2.48%, at £20.70 – some way short of LongRiver's new offer, even after accounting for the 45.41p proposed dividend which is included in the consortium's provisional price. But the shares had risen as high as £22 during the day as investors banked on an even higher bid but then settled some way below the offer price, indicating that some shareholders believe a deal may be in the offing. One top 20 investor, speaking to Reuters, said: "A bid at £22 seems a very fair out-turn." | Shares in Severn Trent last night closed up 50p, or 2.48%, at £20.70 – some way short of LongRiver's new offer, even after accounting for the 45.41p proposed dividend which is included in the consortium's provisional price. But the shares had risen as high as £22 during the day as investors banked on an even higher bid but then settled some way below the offer price, indicating that some shareholders believe a deal may be in the offing. One top 20 investor, speaking to Reuters, said: "A bid at £22 seems a very fair out-turn." |
| The government has been trying to encourage pension schemes to invest in infrastructure projects in recent years and has looked at a number of ways of incentivising such deals. Water utilities are seen as an attractive investment because they are closely regulated, which helps give certainty on the steady returns that investors receive from such businesses. | The government has been trying to encourage pension schemes to invest in infrastructure projects in recent years and has looked at a number of ways of incentivising such deals. Water utilities are seen as an attractive investment because they are closely regulated, which helps give certainty on the steady returns that investors receive from such businesses. |
| The Universities Superannuation Scheme (USS has been growing its so-called alternative investments, expanding into areas such as forest land, hedge funds, private equity and infrastructure projects. | The Universities Superannuation Scheme (USS has been growing its so-called alternative investments, expanding into areas such as forest land, hedge funds, private equity and infrastructure projects. |
| Severn Trent bidders need to offer more | Severn Trent bidders need to offer more |
| The bidders for Severn Trent can huff and puff all they like about the wonderful takeover price they are offering, but the hope here is that the board tells them to jump into the nearest reservoir. There are two reasons why. First, their third offer of £5.3bn, or £22 a share, is still not a knockout. OK, a 21% premium to the pre-approach price looks pretty if instant gratification is your taste. But who owns a water company for quick thrills? The game is about the steady accumulation of inflation-proof dividends. That's what Severn Trent offers if management does its job well and the regulatory regime is roughly stable. At £23, the board is probably obliged to surrender. But £22, or £21.55 after the payment of the final dividend, should be rejected. Second, the LongRiver consortium – comprising a Canadian pension fund, the Kuwait Investment Office and the UK universities pension scheme – still hasn't said a word about how customers will be treated. It should have set out its thinking on day one. Nils Pratley | The bidders for Severn Trent can huff and puff all they like about the wonderful takeover price they are offering, but the hope here is that the board tells them to jump into the nearest reservoir. There are two reasons why. First, their third offer of £5.3bn, or £22 a share, is still not a knockout. OK, a 21% premium to the pre-approach price looks pretty if instant gratification is your taste. But who owns a water company for quick thrills? The game is about the steady accumulation of inflation-proof dividends. That's what Severn Trent offers if management does its job well and the regulatory regime is roughly stable. At £23, the board is probably obliged to surrender. But £22, or £21.55 after the payment of the final dividend, should be rejected. Second, the LongRiver consortium – comprising a Canadian pension fund, the Kuwait Investment Office and the UK universities pension scheme – still hasn't said a word about how customers will be treated. It should have set out its thinking on day one. Nils Pratley |
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