Bidder for UK's Severn Trent threatens to walk away

Mon Jun 10, 2013 6:27am EDT
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By Anjuli Davies and Chris Vellacott

LONDON (Reuters) - The Canadian-led consortium trying to buy Britain's Severn Trent (SVT.L: Quote) threatened to walk away after its third approach was rejected, prompting two of the water utility's major shareholders to urge a return to talks.

Shares in the British company dropped almost 6 percent on Monday after it rejected the consortium's proposed $8.2 billion offer, ahead of a deadline on Tuesday for a firm bid.

Borealis Infrastructure, part of Canadian pension fund OMERS, a Kuwaiti sovereign wealth fund and Britain's Universities Superannuation Scheme want to buy Severn Trent for its steady cash flows.

But the utility, which has 7.7 million customers mainly in central and western England and Wales, said the latest offer of 2,200 pence per share failed to reflect its long-term value and future potential.

A source close to the consortium told Reuters that no talks had been held since May 14.

One of Severn Trent's 10 biggest shareholders told Reuters on Monday the company should start engaging with the consortium with the aim of achieving an offer of more than 2,300 pence per share.

"We certainly encourage them to engage and protect the rights of shareholders," the investor said, on the condition of anonymity. "(But) any price below 2,300 pence per share isn't worth being considered. Let them walk away, they don't deserve assets at this price."

A second investor, one of the 15 largest, said it was concerned Severn Trent was playing a "very dangerous game".   Continued...

A Severn Trent sign hangs on a gate at Cropston Reservoir in Cropston, central England, May 15, 2013. REUTERS/Darren Staples