Severn Trent’s Share Price Plunges after LongRiver Says No New Acquisition Offer Coming

on Jun 10, 2013

Severn Trent’s share price (LON:SVT) fell by more than five percent to ₤19.6572 on the opening bell today, June 10, after a consortium of potential buyers said there would be no new acquisition offer following the rejected ₤5.3 billion bid for the U.K.’s second-largest publicly traded water utility company.

The LongRiver consortium comprised of Borealis Infrastructure, part of Canadian pension fund Omers, Britain’s Universities Superannuation Scheme and a Kuwaiti sovereign wealth fund, offered to pay ₤22 per share for Severn Trent last Friday, June 7. The proposal was rejected later the same day after the company said that the offer continued “to fail to reflect the significant long-term value of Severn Trent or to recognise its future potential.”

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“Since we submitted our proposal on 14 May 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,” Borealis chief executive officer Michael Rolland said in a statement today.

According to UK takeover rules, the consortium has until June 11 to make a formal offer for Severn Trent or walk away.
LongRiver’s first ₤5 billion bid was made on May 14 and was rejected by the water utility company a day later. The consortium raised the price on May 31, offering about ₤5.2 billion for the company or ₤21.25 per share. The utility once again said the bid was too low and only valued the stock at ₤20.7949 apiece because shareholders wouldn’t receive a ₤0.4551 dividend. The latest offer at ₤22 per share includes the dividend and is 3.53 percent higher than the May 31 approach.

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Last month Severn Trent investors said they would consider selling their shares for ₤23 or more, although Reuters quoted a top 20 investor as saying last Friday that the ₤22 offer was “very fair”. The board of Severn Trent has argued that a takeover offer should include a substantial premium because of its scarcity value – it, Pennon and United Utilities are the only remaining publicly traded privatised regional water monopolies. Severn Trent’s shares, which were changing hands for about ₤18 before the approach was announced, hit an all-time high of ₤22 last Friday.
**Severn Trent’s share price was ₤19.9242 as of 10.06.2013, 08.20 BST.**


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