Eight down, two to go

Elizabeth Fournier
INTERNATIONAL investors are thirsty for British utilities. If the Canadian-Kuwaiti consortium can seal the deal for Severn Trent, it’ll be the eighth of the UK’s 10 water companies to become privately owned, and the fourth to be snapped up by a foreign owner in the past six years.

The price that’s rumoured to have been offered for Severn Trent looks compelling – well above what it’s likely to offer investors if it remains listed. It already has shareholders in the UK’s other two listed water firms, United Utilities and FTSE 250 listed Pennon, chomping at the bit.

United in particular has been the subject of bid speculation for years, with rumours rife recently that it has brought in Goldman Sachs to beef up its defences, and speculative figures that push its valuation close to £7bn.

With huge income streams, decent yields and favourable tax regimes, it’s easy to see why overseas funds want a piece of the UK’s utilities.

Though the more cautious among them may prefer to wait until there’s more regulatory certainty in 2015, investors would be foolish to do the same. This might be their last chance to pile in before the funds swoop again, and the pool of options dries up completely.



Herbert Smith is acting as legal counsel for the water supplier, with Stephen Wilkinson leading the team. Wilkinson is global head of M&A at the law firm and has 20 years’ experience advising on a range of major listed and other international companies on mergers and acquisitions, joint ventures, demergers and other corporate transactions.

Rothschild and Citi are the banks advising Severn Trent during the takeover approach, led by Crispin Wright and Simon Lindsay respectively. Citi’s Lindsay worked on the long-running Glencore Xstrata merger.

The consortium is being advised by Deutsche Bank, led by Alan Brown and James Agnew, and RBC Capital Markets, headed up by Dai Clement.