FTSE 100 utility Severn Trent last night turned down a surprise takeover offer after meeting with the bidders, saying they were offering only a “modest premium” that failed to recognise the firm’s value.
The takeover approach for an undisclosed sum was met with surprise by analysts yesterday, who pointed towards an upcoming price review by the regulator.
If a deal is eventually made with the consortium – which comprises Canada’s Borealis Infrastructure Management, the Kuwait Investment Office and UK pension fund the Universities Superannuation Scheme – the rumoured valuation of £5bn would give shareholders a premium of over 20 per cent on the firm, which had a market cap of £4.34bn yesterday.
UK-regulated firms have grown popular with investors due to their long-term stability and protection against inflation. But the timing of this approach has surprised some as UK water companies have their price controls reviewed every five years by the regulator Ofwat, with the next one due in 2015.
“There is always speculation but to launch a takeover approach in year three of a five-year regulatory cycle is a little surprising,” Peter Atherton, analyst at Liberum Capital, told City A.M. “If the rumoured £5.3bn valuation is correct, I’d be surprised if another bidder came in to rival the offer.”