The Board of Severn Trent has unanimously rejected a revised offer from the LongRiver Consortium which values the company at £5.3 billion – an increase on the previous £4.96billion offer.
In a statement issued at close of play on Friday, the board of directors of Severn Trent said it had given careful consideration to the pre-conditional possible offer announced by LongRiver Partners, a consortium led by Borealis Infrastructure Management Inc. which includes the Kuwait Investment Office and Universities Superannuation Scheme Limited.
The Board said that the offer price of £22 per Severn Trent ordinary share assumes that the 45.51p per share final dividend already announced in respect of the year ended 31 March 2013 is not paid to shareholders. If the announced final dividend is paid to shareholders – and Severn Trent ordinary shares are due to go ex-dividend on 19 June 2013 – then the Proposal values each Severn Trent ordinary share at £21. 54..
The statement said the Proposal represents an increase of only 3.5% on LongRiver’s previously announced conditional proposal and a premium of only 20.5% to Severn Trent’s share price the day before the announcement of LongRiver’s interest in Severn Trent.
The Board said that having consulted its financial advisers, it has “unanimously concluded that the Proposal continues to fail to reflect the significant long term value of Severn Trent or to recognise its future potential.” Severn Trent said the inflation-linked nature of its business model provides shareholders with a "highly attractive investment at a time of exceptionally low interest rates."
Andrew Duff, the Chairman of Severn Trent, commented:
“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.”
According to a report in yesterday’s Financial Times newspaper, the consortium is prepared to walk away from the deal unless the water Severn Trent board agrees to,talks. LongRiver now has until 5pm on Tuesday to make another offer under Takeover Panel rules.
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