Severn Trent Rejects £22 Per Share Offer

LONDON -- The shares of Severn Trent  (LSE: SVT  ) slumped 102 pence, or 5%, to 1,968 pence during early London trade this morning after the water company rejected a conditional £22 per share offer from a consortium of investors, which said it may now walk away from the deal.

The FTSE 100 member claimed the proposal from LongRiver Partners, which comprises Borealis Infrastructure Management, the Kuwait Investment Office and the University Superannuation Scheme, "failed to reflect the significant long-term value of Severn Trent or to recognise its potential".

Today's announcement came one week after Severn Trent rejected a £21.25 per share conditional proposal from the same consortium.

Andrew Duff, Severn Trent's chairman, said this morning:

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.

Duff also claimed: "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."

However, Michael Rolland, the chief executive of Borealis, retorted:

Since we submitted our proposal on 14 May 2013, no member of the Consortium or its advisors has met any of the directors of Severn Trent or its advisors, 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.

LongRiver's £22 per share proposal is equivalent to 22 times Severn Trent's trailing earnings and would earn a projected 3.7% dividend yield.

Of course, whether that current share-price rating and the possibility LongRiver's approach will eventually come to nothing now make Severn Trent a sell is something only you can decide.

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